I've seen this criticized by both the left, right, and populists positions.
I DO think this article mischaracterizes the situation. The situation, as I understand it, is a crisis of confidence and liquidity. The impact was described to senior congressional leaders as being able to quickly spread to the entire credit industry. That means retail credit, auto loans, bridge loans -- everything that makes our system work was at risk of shutting down.
That's why the blank check: to buy unknown risk now and then auction it off later. I'm not getting into the politics of it, aside from simply stating I doubt Paulson is going off to buy his own country or moon base (which he could probably afford!) and that the more complicated you make the deal, the more you start defeating the entire purpose of an executive branch in the first place -- some things respond better to a single-decision-making point instead of a committee. But if you're worried, call your congressmen and by all means tell him/her how you feel.
My concern is I'm just not sure the fundamentals of the problem are being solved, and I wonder how you can fix something while keeping the system in place that caused the problem in the first place. In my opinion, this problem is just another normal swing in the capitalist system, whereby people looking to game the system figure out something that can't work long-term and the system eventually stresses out. We usually tweak the rules and we move towards a new excess in 10-20 years. I'm concerned that I'm not hearing anything about the "tweaking". As I understand it, Congress is going to be working through all of that.
It's going to be really hard for a committee made up of political hacks to publicly figure out what went wrong in the middle of an election cycle without degenerating in schoolyard name-calling. Oddly enough, it's much easier just to authorize Treasury to spend some money. That doesn't give me a warm and fuzzy feeling, but I do think immediate action is necessary and I'm at least happy that Congress can come around to getting this one thing accomplished.
Haven't we seen enough of this style of decision-making and 'action' from this administration? Take a look at the record, at all the high-pressure-sales-to-the-citizens executive actions they've taken. It's a lot like Iraq. Pump up the fear in Congress and among the populace that 'something terrible' will happen if we don't immediately cede rights and budget to the exec to do 'whatever trick is up our sleeve, don't worry we'll tell you all about it later.' We've seen enough erosion of rights and we've seen enough power grabbing. It's time to say no, take our medicine, and clean up the mess we've all caused.
'No Mas.'
So because the pattern up to now was flawed, we reject this instance, under the assumption that it must somehow be flawed as well?
That's not logical, in my opinion. Each case has to stand on its own.
Take each asset, calculate fair value, apply 30-50% discount, and put in a limit bid. If someone wants to buy them, let them.
While the current bagholders have much motivation to get rid of them, they won't sell them at market value because doing so would render many of them insolvent. (Many of them are marking these assets at $0.60 on the dollar on their balance sheets).
So the Treasury is planning to help out the banks by giving these banks what they want - ability to sell the assets at above market price. (which results in a transfer of losses from the banks to the taxpayers)
"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."
Please folks, call your congress-people. This is the kind of tyranny that caused the United States to form in the first place.
www.senate.gov www.house.gov
If we're going to bail them out, we should nationalize them, that way we at least have the potential of making money from the upside.
Otherwise it's just a continuation of our current fiscal policy: socialism for the rich.
this is too big to fail
the alternative would be worse
markets will never recover unless we act
now that we've handed over a blank check once in response to these issues, we'll be doing it again and again and again
fuck that, i'm liquid. put some of this shit on the auction block and i'll bid on it, yeah, the seller will take it up the shorts. but it will sell. will i buy ten bankrupt houses for $5k each without knowing if they are on a landfill? sure. so would others.
