Bush BailOut Is Larceny

Armed with catastrophic predictions reminiscent of the rushed run-up to the Iraq War, the Bush White House insists that collapse of the world economy is imminent if the administration isn't IMMEDIATELY given a blank check for up to $1 trillion to dole out to the financial services industries and its richly paid executives.

Wall Street Gets Bailed Out by Me When I'm Getting Screwed?
Explains noted economist Robert Reich at TPM Cafe:

"The public doesn't like a blank check. They think this whole bailout idea is nuts. They see fat cats on Wall Street who have raked in zillions for years, now extorting in effect $2,000 to $5,000 from every American family to make up for their own nonfeasance, malfeasance, greed, and just plain stupidity.

"Wall Street's request for a blank check comes at the same time most of the public is worried about their jobs and declining wages, and having enough money to pay for gas and food and health insurance, meet their car payments and mortgage payments, and save for their retirement and childrens' college education.

"And so the public is asking: Why should Wall Street get bailed out by me when I'm getting screwed?"

Below are ten quick-reading reasons why this bailout proposal is more a last-chance greedy power grab by the Bush administration than a vital move to protect the American people.

TEN REASONS WHY BUSH'S PROPOSED BAILOUT IS LARCENY 1. Lack of accountability or transparency, resulting in a "blank check" of up to $1 trillion. Section 8 of the Draft Proposal for Bailout Plan reads, "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion... "

That means that the American people can never review and will never know how the $1 trillion was spent by the Bush administration.

2. Lack of legal recourse for inappropriate use of $1 trillion in funds. Section 8 of the Draft Proposal for Bailout Plan concludes, "... and may not be reviewed by any court of law or any administrative agency."

That means that no matter how the Bush administration spends the $1 trillion, they can't be sued or otherwise held liable for it. Even if the funds are used fraudulently or for any improper or unrelated purpose.

3. Lack of specific or objective criteria to determine who should be bailed out, which could result in cronyism, fraud, favoritism based on political affiliation or other misuse of taxpayers' funds.

Recipients of bailout funds are determined solely by the Treasury Secretary. There are no financial benchmarks, nor prohibitions of giving funds to related parties or based on partisan or other discriminatory factors. There are also no prohibitions of kickbacks.

4. Lack of specific valuation criteria for "illiquid assets" acquired by the federal government, which would result in overpayments to institutions who made or purchased the bad investments.

The Bush bailout plan is silent on what price the Treasury Secretary must pay the financial services industry to bailout their bad mortgage loans. Will the Secretary pay fair market value (i.e. what the "illiquid asset" is worth today) or will he pay the premium value of what the bad loan used to be worth before the market dropped?

This is important because if the Secretary pays the higher premium price, then American taxpayers are automatically stuck with losses that likely can never be recouped.

Normal business, and consumer, practice is to pay for an asset what it's actually worth on that day (i.e. fair market value). Princeton economist Paul Krugman describes "having taxpayers pay premium prices for lousy assets" as "in effect throwing taxpayers’ money at the financial world."

For more, see Concerns about the Treasury Rescue Plan by the Brookings Institute.

5. Lack of plan, budget or staff to oversee and account for this massive new Treasury Department function, which will inevitably cause a significant expansion in federal government bureaucracy.

This would be a massive undertaking on an unprecedented scale, and would cost billions of dollars in new federal government bureaucracy needs.... costs that would be passed on (coincidentally?) to the next presidential administration, and not borne by George Bush.

And yet, Section 7 of the Bush bailout plan gives unlimited powers to the Treasury Secretary: "Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure."

6. Lack of reform or regulation of, or any measure control over, institutions bailed out. Incredibly, the Bush bailout plan requires no changes in the failed practices of the financial services industry.

Economist Robert Reich is spot-on when he writes that as a bailout condition, Wall Street firms must "agree to comply with new regulations over disclosure, capital requirements, conflicts of interest, and market manipulation.

The regulations would "emerge in ninety days from a bi-partisan working group, to be convened immediately. After all, inadequate regulation and lack of oversight got us into this mess."

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