naked capitalism: Why You Should Hate the Treasury Bailout Proposal

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urge everyone to call your congress creatures and let them know this bailout plan is absolutely unacceptable. Paulson is nuts if he thinks anyone with a brain is going to agree to this. We need reasoned, rational, LEGAL control over this banking crisis, not a Treasury Secretary who thinks he is above the law. This entire Bush administration seems to be guilty of this, and I for one am damned sick of it. PLease go to the link and read the entire post — well worth it.

naked capitalism: Why You Should Hate the Treasury Bailout Proposal

A mere two weeks ago, the Fannie/Freddie rescue was called the mother of all bailouts by some commentators. If the plans of the Administration come to fruition, it will shortly be surpassed by the $700 billion mortgage rescue plan proposed by Hank Paulson late last week.

The increase of the request from the initial $500 billion and the release of the shockingly short, sweeping text of the proposed legislation has lead to reactions of consternation among the knowledgeable, but whether this translates into enough popular ire fast enough to restrain this freight train remains to be seen.

First, let s focus on the aspect that should get the proposal dinged or renegotiated regardless of any possible merit, namely, that it gives the Treasury imperial power with respect to a simply huge amount of funds. $700 billion is comparable to the hard cost of the Iraq war, bigger than the annual Pentagon budget. And mind you, $700 billion is not the maximum that the Treasury may spend, it s the ceiling on the outstandings at any one time. It s a balance sheet number, not an expenditure limit.

But here is the truly offensive section of an overreaching piece of legislation:

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 puts the Treasury’s actions beyond the rule of law. This is a financial coup d etat, with the only limitation the $700 billion balance sheet figure. The measure already gives the Treasury the authority not simply to buy dud mortgage paper but other assets as it deems fit. There is no accountability beyond a report contents undefined to Congress three months into the program and semiannually thereafter. The Treasury could via incompetence or venality grossly overpay for assets and advisory services, and fail to exclude consultants with conflicts of interest, and there would be no recourse. Given the truly appalling track record of this Administration in its outsourcing, this is not an idle worry.

But far worse is the precedent it sets. This Administration has worked hard to escape any constraints on its actions, not to pursue noble causes, but to curtail civil liberties: Guantanamo, rendition, torture, warrantless wiretaps. It has used the threat of unseen terrorists and a seemingly perpetual war on radical Muslim to justify gutting the Constitution. The Supreme Court, which has been supine on many fronts, has finally started to push back, but would it challenge a bill that sweeps aside judicial review? Informed readers are encouraged to speak up.