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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Greek bailout loan decision pushed to October

Greece's international rescue partners will delay until October their decision on paying out a batch of bailout loans needed to keep Athens from a disastrous bankruptcy, the head of the eurozone finance ministers' group said Friday.

The announcement at the meeting in Wroclaw, Poland, was yet another example of Europe's halting effort over almost two years to solve its crisis over too much government debt in some countries.

U.S. Treasury Secretary Timothy Geithner had joined the meeting -- a first for the U.S. finance chief -- in a sign of how the U.S. is getting increasingly concerned over the global impact of the eurozone debt crisis.

But the participants appeared unable to make progress on any front.

The European finance chiefs ruled out providing more fiscal stimulus to get their lackluster economies growing again, saying high debts left no space for extra spending. Another sticking point in the aid for Greece, a Finnish demand for collateral for a second bailout now being put together, was not solved either.

The next€8 billion ($11 billion) installment of Greece's first bailout package depends on a review of the country's finances. The payout was originally scheduled for end-September and the Greek government has said that without the new loan it will run out of money next month, forcing it to stop paying public-sector salaries and eventually default on its massive debts.

But officials from the eurozone and the International Monetary Fund have delayed their assessment until Greece has laid out a clear plan on how it will cut its deficits to targets agreed in its bailout program, said Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the regular meetings of eurozone finance ministers.

Juncker said officials welcomed "the renewed, firm commitment of Greece" to its austerity program and said they "would decide in October on the next tranche."

A delegation from the eurozone, the IMF and the European Central Bank unexpectedly left Athens on Sept. 2, delaying the much-awaited confirmation that Greece was meeting the terms of its euro110 billion ($152 billion) bailout agreed in May, 2010.

The country's struggle to keep a lid on its spending and raise enough revenue has also increased uncertainty about a second euro109 billion aid package agreed in July, when it became clear that the first batch of money would not be enough.

Fears that Greece might not get more rescue money and default have made Greek bond prices plummet, weighed on the euro's exchange rate with the dollar and roiled stock markets.

Austria's Finance Minister Maria Fekter, traditionally a hard-liner when it comes to sticking to the bailout conditions, said she was "very optimistic that the next tranche can be paid out to Greece."

She warned against a Greek default, which she said would be "very costly." Yet she did not rule it out as a possibility in the future.

"Should a situation arise, where this way (of providing rescue loans) suddenly becomes more expensive than the alternative, we will have to think about the alternative," Fekter said. "But at the moment this is not yet the case."

Friday's announcement fell short of a complete assurance Greece will get the money and hopes for tangible progress on another obstacle were quickly thwarted, when Finnish Finance Minister Jutta Urpilainen said there was still no solution to her country's demand for guarantees to back its contribution to the second rescue package.

The small Nordic country's demand has triggered similar requests from several other states, including Austria and the Netherlands.

Fulfilling all the requests for collateral could shave off hundreds of millions of euros from the overall bailout sum, hurting Greece's prospects of recovery and angering other eurozone nations who would have to fund the guarantees.

"If collateral will be provided, this will be done at an appropriate price," Juncker said, without giving further details on where discussions were headed.

Friday's meeting comes after several turbulent weeks on global financial markets, triggered by fears over the impact of a potential Greek default as well as mounting evidence of a slowdown of the world economy. Some eurozone banks have been facing difficulties to obtain short-term funding in U.S. dollars as other lenders worry about their exposure of the debt of struggling countries like Greece, Spain or Italy.

Those funding issues pushed the European Central Bank, the U.S. Federal Reserve and three other major central banks to give banks easier access to dollars on Thursday, in the hope they can stop credit from seizing up like it did after the collapse of U.S. investment bank Lehman Brothers three years ago.

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