First of all, this bill gives essentially unchecked power to Henry Paulson. It does establish an oversight board, but Paulson is on the oversight board. Ben Bernanke, who is on record saying we should overpay for troubled assets is also on it. Furthermore, even if the oversight board were legitimate, the standards that Paulson must adhere to are so vague that he’ll be able to do whatever he wants. “As determined by the Secretary” are common words in this bill. So while there are some words to the effect of preserving retirement funds and protecting homeowners and other nice-sounding rhetoric, Henry Paulson will be able to solely determine what actions meet those ctiteria.
Paulson will be able to buy equity or make loans or buy troubled assets directly. Limits on executive pay only apply while the government has an equity or debt stake, which means the banks can simply wait until that stake is sold to make exorbitant compensation payments. In addition, limits are only provided for NEW contracts. Executives who made the bad decisions that put these institutions in danger will still receive bonuses galore. In fact, this bill makes it more likely that they get exorbitant bonuses because the purchase of assets by the government will drastically increase profits and trigger bonus payouts. The only work done to earn those bonuses will have been lobbying for this bill to pass. Moreover, companies will have a 2-month window to establish contracts for executives that pay high bonuses. There is absolutely no way that any executive of a financial institution is going to be one dime poorer under this legislation.
I wish I could scream this from the top of the world: Any nominal limit, be it 250 billion, 700 billion, or any other number is completely meaningless. The bill states that any limits apply to aggregate purchase price paid for “all troubled assets held.” This means that troubled assets sold (possibly at a huge loss) no longer appear in that aggregate.
By the way, under other provisions, Paulson could easily justify selling assets at a huge loss to free up space under the limit because he is directed to use his discretion to hold those assets that do the most “good.” Who determines which assets are these? Well, it aint Barney Frank.
If Congress passes this legislation, it is nothing short of a theft from the American people. Worse still, once it is passed it leaves Congress inept to affect administration of its provisions. Congress is handing power to Henry Paulson and washing their hands of it. I have no doubt that this is intentional. When the light of day hits the results in a few months, they’ll tell us they are not to blame. It’s Paulson’s fault, they will tell us. He didn’t implement it properly. Don’t blame us.
Remember, this is the same Congress that declared war on Iraq, yet passes all the blame for that disaster on to W.
One last thing. They keep saying this thing is urgent and necessary to unfreeze credit markets. So I ask you to ask yourself a few questions:
Has my credit card company told me to stop making charges? Am I still receiving credit card offers in the mail? How long would it take me to find internet ads for low-interest mortgages or refinancing? How many people do I know that really need a car loan in the next few months anyway?
Please call each of your 3 Congressional representatives, register your opinion, and withhold your vote pending their decisions on this bill. Tell them as well that you will not vote for their party’s presidential candidate if he supports this bill. If you are a member of one of the political parties, it is especially important to hold your own party to account.