Dennis Kucinich Investigates Treasury's Blank Check
| Fri Nov. 14, 2008 12:35 PM PST
It looks like the Bush administration can create its own reality after all. Just this week Treasury Secretary Henry Paulson turned the $700 billion bailout from a program to purchase toxic assets from troubled financial institutions to one that will invest in banks. Understandably, this abrupt change of course angered members of Congress, who were now left to wonder if they'd been led astray in supporting the stimulus package. At a hearing on Friday, convened to examine the Treasury Department's use of the bailout funds, lawmakers on both sides of the aisle vented their outrage. The question if whether their displeasure will make a dime's worth of difference.
Displaying the range of congressional discontent, both Rep. Dennis Kucinich (D-Ohio), the chair of domestic policy oversight subcommittee, and Rep. Darrell Issa (R-Calif.), its ranking member, accused the Treasury of a "bait-and-switch" and questioned Neel Kashkari, the 35-year-old former Goldman Sachs banker selected by Paulson to supervise the bailout, about the sudden reversal.
In response, Kashkari explained that Treasury had "worked very hard with Congress" to negotiate the bailout bill, but as the financial crisis worsened in the weeks following the bailout's passage, Paulson felt he "had to take very aggressive action." And Kashkari assured the committee that his boss had only decided "late last week, earlier this week," that the plan had to change. Issa, who voted against the bailout, suggested that the agency had planned all along to ignore the specific provisions of the bailout and instead wield the broad authority Paulson had originally demanded. "Congress is feeling you played a bait and switch game," Issa said.
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Fuming that Treasury had ignored congressional provisions in the bailout bill to buy troubled mortgage assets and help homeowners in jeopardy of foreclosure, Kucinich charged, "The Secretary just took some scissors and cut it out." He also accused the administration of still relying on trickle-down economics to fix the financial crisis. "You have to get money into the grass roots. In your model you just have some trickle down and it never trickles down, everyone knows that."
Kashkari, the interim assistant secretary for financial stability, remained remarkably calm and painstakingly polite in the face of tough questioning, often using phrases like "with deep respect" and "I understand your concern." His demeanor won him some points—Rep. Brian Bilbray (R-Calif.) called him "probably the best spokesman the administration has." Kashkari repeatedly stressed that if Treasury had spent the entire $700 billion buying home loans, they would have been able to buy about 3 million of them—a small fraction of America's 55 million outstanding. By injecting money into the banks instead, the Treasury "influenced almost every loan in America," Kashkari claimed. But the fundamental conflict remained. Congress had mandated one bailout, and Paulson and the Treasury Department are executing a different one.
"The legislation we asked for was to prevent a complete financial collapse," Kashkari said. "We are every day trying to figure out how to stabilize the system so we can help everyone. My phone is ringing off the hook. But if we went out and helped everyone who needs it directly the $700 billion wouldn't go far enough." Kashkari said that's why Treasury has to work from the top-down, helping banks first. Kucinich, who voted against the bailout, said he was confident Congress would never have approved it if lawmakers had known Paulson would change the plan. But the fact remains: the bailout is law. Perhaps Paulson got his blank check after all.
(The House Committee on Oversight and Government Reform, which contains Kucinich's subcommittee, has been holding a series of hearings investigating the financial crisis. Mother Jones covered the hearings on Lehman Brothers, AIG, credit rating agencies, federal regulators, and hedge funds.)
Comments
Gee, do you think maybe members of Congress should actually Read the legislation they vote on, to make sure it's going to do what they think it's going to do, and what they boldly assure it's going to do?
Maybe after reading the proposed bills, they could actually take a little time to consider whether the wording limits the law to it's stated purpose, or allows some un-elected bureaucrat to do something entirely unintended and unconsidered with total impunity. (wouldn't that be nice?)
If they did, then maybe we could stop hearing stories like this one, and quotes from the Speaker of the House saying: "None of us knew that was in the bill when we voted for it!"
Support Responsible Government.
Make them Read the Bills they turn into laws for US to obey (and pay for).
I is wit choo DemoPublicans. Anybody remember the democratic primaries? Remember when Wolf "doucheface" blitzer asked about the Patriot Act and said that Kucinich was the only one to vote against it. And when asked why he voted against it, with a look of huge disgust he replied with "I read it". He got a HUGE response from the crowd. Gotta love that little guy!!! At least there's a few good ones down there.
Submitted by William W. Wexler (not verified) on Sat Nov. 15, 2008 7:27 AM PST.
Why does the educated press keep referring to this as "the $700 billion dollar bailout"?
It's NOT $700 billion, it's $850 billion PLUS the $140 billion that Paulson dealt to the banking industry by changing a teeny-weeny provision the tax code.
So please start naming this what it really is. It's $990 billion, which for all practical purposes is A TRILLION EFFING DOLLARS.
This is starting to piss me off. If the press can't even name this thing properly, how can it be discussed?
-Wexler
Most world economies have gone from Manufacturing, Producing and Innovation to pushing money and paper around on Wallstreet and that in my opinion is why we are in the mess we are in today..
There are two exceptions to this rule in China and India who have continued to manufacture and produce product which they sell to the world which has forgotten about Manufacturing and Production of products..The only production left in the USA is the manufacture of Military weapons..Could it be that the USA is afraid of what would happen if they lost this production and that is why they continue their wars in Iraq and Afganistan..
Wallstreet and other world markets did very well until greed and corruption showed them for what they are..Crooks..
It was then that it was noticed that Manufacturing and Production had moved to China and India where the big corporations in order to help their bottom line on wallsteet had shipped them..
Now China and India are sitting pretty while we have a recession..
I think the financial world is probably going to take a few more fish broadside, and there's a chance it could belly-up and slither beneath the waves. IF that happens, a big 'if', it will suck to be us. For many moons. Many, MANY moons. But, karma's a bear, and so's her sister, and 20-30 years of creative financing have left us super-wobbly, and the neighbors are talking, talking about things like 'skip the dollar, I want those 3-pointed rocks with the holes in them again', and others are folding origami out of all these mortgage-backed securities or making papier mache. They got lost in hypotheticals, took a lot of people's money, and a lot of people have lost out super-big, bigger than Enron, even, and I think Wall St. is going to lose investors permanently, along with whatever's left of their reputation even if they don't get closed down. It only takes a few Dick Grasso's to set a terminally negative example, then all the lemmings follow...everyone wants something for nothing, and that's the appeal of the market, get rich for sitting on your butt, basically, and it's going to be a rude rude awakening for a lot of people before it's all over with. Paulson needs that blank check, because right now, the proper expenditure to right this tub and steam out of harm's way is set at: X+?.
In other words, anybody's guess. I hope they can piece it all together...if not, it'll be aluminum NewDollars until Poland forecloses...
Although I think there is some merit in what DemoPublicans wants to enact in order that members might be goaded into the awareness of what they wrought, it seems difficult enough to fashion verifiable legislation.
How many of us have checked the box about conditions specified for installation of new software yet never having actually read the terms and conditions? Certainly this does not have the weight of legal remedy for those of us who failed to read these paragons of legal liabilities, mindlessly checking the Agree box. It just seems that after a while it would be commonplace to "pencil-whip" that precondition of legislation. And who would call into question instances of such violation? Why the very folks for whom the bill applies, it would seem. I can see the multiple-choice test which this kind of legislation would trigger to test the signoff guarantee of all Congressfolks and Senators. And, of course, this just requires reading the legislation (a worthy goal in and of itself, I'll admit) but not whether they understand what they read. This flashes back to the new software check box example too. Whew!
Instead why not legislate some meaningful metric which can be verified by anyone (legislator or other interested parties) to impartially check the efficacy of any legislative effort. Failing the metric would automatically require an alteration of either the metric or legislative design to conform to a better approach at solving the issue embodying the legislative purpose. Having a statement of purpose and an accompanying methodology for assessing the success of the goal would tend to make any interested party a watchdog of legislative effectiveness. "Test Your Legislative Design" ought to be a tenet in how effective legislation could be fashioned so that legislation never tested against principles of legislative logic would be a thing of the past. Any proposed legislation which finds it difficult to administer a test of effectiveness would seem to require reconsideration in conception and/or intent. How many legislative gambits of current law could withstand this level of review?
A recent example would be the $700B ($1T) bailout. It would seem that the purpose of the legislation would be the easing of credit availability for which a means of assessment would be applied to gauge the success of easing credit (or NOT). Then a different approach might be forthcoming in the availability of the second installment of the total plan if enough folks think the legislation fails to meet its own expectation. Something would have to change in the approach or the definition of success, either of which would be encoded into the revised legislation after adequate review. This would contribute to the transparent nature of legislation, reducing the prevalence of earmarks and other legal fictions and avoiding assignment of functionality to any one person or small group of persons (e.g., Paulson or Kashkari).
Imagine an intent and means of verification to justify the infamous Bridge to Nowhere!
If we are going to inspect banks and bankers, why are we not inspecting offshore banking where all the crooks on Wallstreet are hiding their money and not paying taxes on money earned in this country.
We caught one UPS but there are many others.
Submitted by William W. Wexler (not verified) on Sun Nov. 16, 2008 4:58 AM PST.
Americans are in a state of denial about how bad this is and how we got here. For the last 8 years we've been watching a constant parade of businesses that used to be national institutions fail and/or whack 1000s of jobs. We've seen manufacturing facilities marching overseas, accompanied by the loss of livable wage blue collar jobs while the national attitude towards unions has been turned sour by an endless stream of propaganda. We've seen the banking and financial institutions write their own laws and now the very foundation of our economic system is shattered and getting ready to crumble.
I imagine that the passengers on the Titanic must have gone through a similar phase, where they thought "Why, they CAN'T let this ship sink. It's the TITANIC, after all." That's where we are right now. We believe that the new captain will save us, that the ship CAN'T be allowed to sink. It CAN'T, because after all, WE'RE on it.
If you would like some insight as to how we got here, I suggest that you read Ralph Nader's writings from the book The Pursuit of Justice, Collected Writings 2000-2003. (I got the autographed copy for a campaign donation). In this book, Nader addresses questionable legislative and economic co-mingling and you will be amazed to find out that he was naming specific deals and companies that have failed. It's not because he's some kind of Svengali character, it's because he's knowledgeable in these matters.
Unfortunately for all of us, some of the names that come up in Pursuit of Justice are now finding themselves mentioned in the context of becoming members of the new Obama Administration. He warns about Glass-Steagall in 1999, his list of corporations, banks, and figures and their excesses is eerily precognitive of what we are reading in today's newspapers.
Obama should have someone on the horn every day begging Nader to take a position on his cabinet or in the government. Treasury Secretary might be a great place for him.
When you're lying on your death bed, you have to stop f*cking around and call the doctor.
-Wexler
The Fed has been planning this since 2000.
www.federalreserve.gov/BoardDocs/Surveys/soma/alt_instrmnts.pdf
Submitted by robert diogenes (not verified) on Sun Nov. 16, 2008 8:48 AM PST.
can we make a RECESSION PAINLESS?
GET the FACTS behind the NEWS
The federal gov't has agreed to spend $300 plus billion on bailouts of various companies plus $750 billion to ease banking liquidity. This does not include $160 billion economic stimulus payment with talk of another stimulus program probably as much or more. This is in addition to a $417 billion budget deficit.
However what is happening is that the large banks are sitting on the public money to protect against their own losses or if financially well off they are looking to acquire banks or their assets at bargain prices.
Now a new complication. On Nov. 3, 2008 the Federal Reserve reported its latest quarterly survey of bank lending practices. The Federal Reserve said that "a high number of bank reported they had made it tougher to borrow across a broad range of loan products". 60% of the banks had tightened credit card debt, 80% had tightened business and commercial loans. 95% raised costs for lines of credit to large and medium size business. 50% of domestic banks said they "were somewhat or much less willing" to make consumer installment loans This report was for Oct. 1-15th. Financial help is not rapidly getting to main street.
Perhaps some of this tightening was needed. But, we must be careful not to repeat one of the great mistakes of the 1929 Great Depression. According to Milton Friedman, in reacting to the speculation at that time, we tightened credit too much and stifled the economy.
Why isn't the tax payer vying for a piece of the tax payer funded pie? Because the tax payer has no real representation in Washington. If congress were to send this money to the tax payer/consumers you would quickly see this economy turn around. The tax/payer should be first on the list to receive tax payer funds. It is a no-brainer. (The next thing congress needs to do is obviously pass a huge education spending bill. What is going on right now in Washington makes the case of a need for better education a given.)
The problem with this world wide crisis is fixable.
This is a consumer driven recession and it's going to be the consumer that will get us out of it.
All these other economist keep saying that there needs to be a price correction/discovery and let the market take care of it. But, they are all missing the simple fact that debt will not price correct easily. In fact it is quite difficult. For example, a basket of goods bought on CREDIT for $1000 last year will not correct in price if that same basket of goods cost $500 next year. The consumer who bought that basket of goods last year is still in debt for $1000 - plus interest.
I clearly see what the problem is with all the treasuries efforts to fix this economic catastrophe.
The money from the treasury is being allocated to non-productive companies. How are these companies going to make any money in the future with the middle class being dead in the water? And, how much do you think the GDP will soon decrease if you continue to throw money at non-productivity? You can give all the money you want to the banks, car manufacturers, etc., if they don't have the costumers they are not going to be productive and therefore non-profitable. The consumer is stressed for cash and has no credit.
Look, the government returned money to the tax payer in the form of rebates earlier this year, but it was not enough. What the tax payer did with the money was either pay off debt or save the money, which is precisely what needs to be done first to save this economy. So, the tax rebate was exactly what this economy needed but is was hardly enough. So I ask you, what else can possibly be done to boost consumer spending that would be more effective than putting money directly into the tax payer hands? Nothing. The consumer needs a larger tax rebate. How about $250 Billion every quarter until the economy climbs out of this rut?
Once these billions of dollars trickles up into the economy the GDP growth will trump any hint of inflation. The deflationary spiral is going to spin out of control if the consumer is not saved.. Giving billions of dollars to these big companies in hope that it will "trickle down" to a consumer in a mountain of debt will never work. It's classic "tickle down" economics that has not worked in the past without also helping the middle class tax payer to the same degree.
Returning more money to the tax payer/consumer would have kept a majority of people from taking money out of mutual funds, 401 K, bank deposits etc. Some consumers would have paid mortgages, bought cars, paid off credit cards, etc. Many new home buyers would have even gotten into the home market. The economy is sinking into a deep hole. Either the CONSUMERS get the BAIL-OUT or none of us will ever be able to see the light of day for a very long, long time.
My hope is that the Treasury Department is already planning to save the consumer in the same way aforementioned. If it is, my only concern to you is that this economic problem would have been a lot cheaper by correctly saving the consumer first.
Think of the invisible hand of consumer sovereignty. The consumer will guide this economy out of this recession with a little capital and some tax relief.
The only way to save this economy is from the bottom up, not from the top down.
The Government has wasted our tax money for too long. It's called wasteful spending. Now the chickens have finally returned home to roost. We have been over taxed and it's time to claim our money back, or this country, along with the rest of the world, will suffer a global depression. Every developed country needs to follow America's lead in cutting taxes or they will be left behind.
It's quite sad that these congressmen and senators we elect don't have a clue-and the market recognizes that.
Gary: Nice ad hominem. It always adds so much to a rational discussion of issues.
The point of the article may be what Paulson is doing. Are we not allowed to consider how it is that he can get away with it?
My point, which it seems you'd rather ignore, is how it happens that so much that comes out of Congress doesn't turn out they way we're told it's going to, and all too often, Congress proves it had no idea what was in the legislation it passed, after assuring us it knew what it was doing.
Don't you find this worrysome?
Or are you only interested in pinning blame on one of the two groups responsible for the problem?
I'm sure that in less than eight years I will be able to (sadly) boast that I did not vote for Obama (or McCain). I am not a conspiracy theorist--mere common sense allows one with an open mind to deduce that the ruling parties are perpetrating an open rape of the American taxpayer, economy, and future.
The Bailout, presented by Paulson, was typical ruling class politics-of-fear. The panic preceding the Bailout was orchestrated, contrived. The rush-to-solution was aided and abetted by the ruling class-controlled media. The Solution (the Bailout) was as vague as a palm reader's prediction. Obama-McCain "criticized" it, but bemoaned its necessity.
The fear-induced rush to the Bailout ended at the Bailout's passage. Its implementation has been strangely non-existant since. Now no one knows who the Bailout was truly intended for, who is now eligible to receive Bailout assistance, who will be exempted or included in the future who was previously thought eligible or exempt, or if there will ever be accountability for the expenditure of Bailout funds.
Could it be the Bailout is actually the greatest Golden Parachute in world history? It is almost intended to create suspicion, distrust, and fear. Funny, that word "fear" keeps popping up. Not a surprise, given our "Government of Fear."
None of us, or our titular rulers, questioned the irrationality of the economic bubble we have been riding. Yes, there were a few naysayers, who now seem clarion voices of wisdom, but whom at the time were arrogantly dismissed by the rulers and their media. We were all allowed to play the fool, seduced by the positions, income, and possessions offered in the great con game. Every confidence game ends with confused dupes wondering "What just happened?" and this one is no different.
Here's a prediction: just as the Republican Party is in shambles now--disgraced and out of power (perhaps forever)--the Democratic Party will be also within a decade. The powers behind our Fear Politics have murdered one of the Twin Sisters and intend to destroy the other. Greed and power are the motivations, chaos will be the means, and the looming socio-economic terror will be the opportunity.
Obama will be given one brief test, to see if he is The One. If he is not a devoted loyalist to the wealth/power consolidators, or if his brand name gets sullied, he will be thrown over in one term (or less). He will have everything and the kitchen sink thrown at him to "test" him: the Greater Depression, a Nuclear or Biological 9/11, Russian and Chinese-backed wars in South and Central America and the Middle East, food shortages, riots, attempted coups, etc. And no "do-overs." If he's successful, he might have a job for life.
I'm sick of the Bush bashing. You liberals act like all the bad things that ever happens is the folt of this president. History will show that the Bush Era of demicracy was the best of times for America. The only way to keep this country safe is to elect a solid conservative.
Tom Delay was right when he said that the marcsists want to destroy the free market system in the name of the economy system of marxism.
That is Marxism, Deane, not "marcsism."
At any rate, the mortgages are at the bottom of the CMOS, which are at the bottom of the CDS. To keep the whole paper ediface up, instead of funneling money to the top cards, you have to stablize the bottom cards - or the whole things falls down anyway.
Stop the foreclosures!
Actually, Deane, Marx said that democracy would come tumbling down when the people learned they could allocate all the money of the government to themselves.
And this 900 billion isnt going to the people. 90% of he people were also against it.
I dont know how people get Marxism whats Wall Street Welfare.
It's kind of like Bush's final con job. I hope! Make sure his buddies are taken care of before he leaves office. And while everyone is watching Paulson dole out the money to the same people who caused the mess, Bush is planning his final assault on the working class. To change policy enough to take environmental and who knows what other regulation back 40 years. What a guy!
I can't help wondering if it is true? Are Politicians really lawyers who couldn't make it as lawyers? We are talking about people in Congress that could be registered as Professional Counsellors "AND" if that isn't scary enough, someone like Paulson can put the fear of God in them and they pass any legislation they are asked for-When Nancy Pelosi actually smiled about her brilliance in getting the Bailout through the House, it scared me and I am getting to old for that kind of thing!
Submitted by joe (not verified) on Thu Nov. 27, 2008 5:52 AM PST.
theres only one solution to this problem REVELUTION.
Or revealution. Reveal the masters behind the crime against the working class. Decent people working hard, striving but never earning enough money to support basic needs. Why is that. The debasing of the dollar. The inflation and those who claim to "fight it". These are the true culprits! Bring them down and make them pay and bring back the goldstandard and 100% reserve banking!
The quickest way to recovery would be to legislate that creditors forgive most individual citizens debts including mortgages. This may wipe out a large number of financial companies, but the generally skilled, educated workforce who would lose their jobs (though be forgiven their personal credit) would no doubt be far more happy and productive (inventive and entrepreneurial) in the nascent public and private green economy.
