Trying to Understand the Bailout Proposal

Posted by Katherine | September 24, 2008 – 11:39 pm
No bailout
“No way, no how, no bailout.”
Read his 6 reasons here.
[jakerome / Flickr]

It’s not just Congress and the campaigns that are grappling with Treasury Secretary Henry Paulson’s $700 billion bailout proposal — citizens are trying to digest it, too.

Yves Smith, a finance expert in New York City, is unhappy with many aspects of Paulson’s plan, but first and foremost he’s worried about its imperial mandate (thanks, Sue Salinger):

[L]et’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. […]

[H]ere 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. […] 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.

Steve Randy Waldman at Interfluidity proposes some big-picture goals for a bailout (hat tip again to Sue Salinger):

There’s no such thing as a choice-free bailout. The government’s largesse will go to some and not to others, and we have to decide. Don’t believe self-styled technocrats who claim that science or the market tells them who deserves the tax- (or inflation-) payers’ dollar. In a bail-out, there are winners and losers, and we get to pick. I think we should focus on a simple goal: Restructuring the economy so that the vast majority of Americans can afford a middle-class lifestyle with very little leverage on household or government balance sheets. That may be a radical suggestion in 2008, but our grandparents would have considered it only common sense.

Abba fan armando3210 is pretty sanguine about the general idea of a bailout. He argues that if it’s properly structured, it won’t actually cost taxpayers any money (thanks again to Sue Salinger):

You think Paulson is feeling that “Swedish disco fire”?

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