MSM Repeats Bush Admin. Lies on Bailout Just as They Did on Iraq War

[clear eye]

Contrary to wide reports of taxpayer protections, http://money.cnn.com/2008/09/29/news/economy/bailout/index.htm?cnn=yes and http://ap.google.com/article/ALeqM5gIDjiYJ79gZgTdZnTavt4TBFFJUgD93FUE7O0, reading the actual bill shows that the actual safety proposals of the Dodd bill have been stripped from the final draft. http://www.c-span.org/pdf/marketsbill_draft.pdf

The Dodd bill required Treasury to obtain actual equity equivalent to money invested in the financial institutions being bailed out, just as the Europeans are doing and the Japanese did in their 1991 crisis. The point of that crucial requirement was that when the economy recovers, the equity could be sold back for repayment or the Treasury would share in future profit. The bill Congress will be voting on eliminated that provision except in the unlikely event that Paulson says the purchased assets have "no bidding process or market prices" and returns to Paulson's proposal to buy only mostly worthless paper. The international community will regard this as irresponsible and see all U.S. debt, including our Treasury bonds, as on shaky ground. As a result they will try to unload our bonds instead of buying them to finance the plan, leaving Treasury to try to pay for it by printing money.

The Dodd bill required an independent board to evaluate each purchase. The current bill makes the "oversight" board the very same people most closely involved in determining asset valuations for the bailout: "The Financial Stability Oversight Board shall be comprised of—
(1) the Chairman of the Board of Governors of the Federal Reserve System;
(2) the Secretary;
(3) the Director of the Federal Home Finance Agency;
(4) the chairman of the Securities and Exchange Commission; and
(5) the Secretary of Housing and Urban Development."
In fact it requires that the prices for troubled assets "shall be set by the Secretary at a level necessary to create reserves sufficient to meet anticipated claims" rather than at their resale value. http://www.c-span.org/pdf/marketsbill_draft.pdf And it requires only a monthly report to Congress. Even those provisions are given a loophole "For purposes of this Act, the Secretary may waive specific provisions of the Federal Acquisition Regulation upon a determination that urgent and compelling circumstances make compliance with such provisions contrary to the public interest." The only the restriction is an after-the-fact reporting requirement. The actual purpose of this change in the oversight provision is to allow Congress to avoid having their fingerprints on the implementation. Rather than protecting the people, the current bill opts to protect Congress.

The current bill specifically includes language to protect the Sec'y of Treasury from all lawsuits related to the plan including authorizing indefinite length stays on all judgements against Treasury including judgements finding unconstitutionality.

The Dodd bill mandated that Treasury use its acquired equity to renegotiate the terms of at-risk mortgages, thus helping the economy. The current bill merely suggests that Treasury do that w/ Fannie and Freddie mortgages and that they encourage private lenders to do likewise.

The Dodd bill provided "only" $150B for the first installment after which there would be Congressional evaluation before more money was released. The current bill authorizes $250B immediately plus another $100B on request for a total of $350B up front and the Treasury can request the remaining $350 billion at any time. It requires Congress to pass a separate law if they wish to deny the later payment (which will never happen). So in the current bill, the full $700 will be paid before Bush leaves office. Schumer has to be commended for valiantly fighting to retain the earlier payment structure (reportedly at one point pounding on the table), but was overridden. This means Obama will be inaugurated with a bankrupt Treasury and a crashed dollar. Even FDR didn't come into such a desperate situation.

The executive pay limitations in the current bill are so full of loopholes (they don't kick in except in the unlikely event that Treasury has acquired equity in the institution), that experts are describing them as "largely symbolic". http://www.nytimes.com/2008/09/29/business/29econ.html?pagewanted=2&_r=1&hp

Even the financiers ultimately won't benefit from this doomed plan as the troubled assests known as "credit default swaps" have been estimated at $35T. http://www.bloomberg.com/apps/news?pid=20601170&sid=awMSohlyeYy0&refer=home Who will? ExxonMobil and Halliburton who must have been panicked about the immanence of the "green revolution" as long as an Obama administration could afford to support it. Multi-national corporations who can weather a dollar collapse, and who will use a Depression as an opportunity to create a longterm, slashing of real wages, and to bust the unions.

By claiming taxpayer protections that don't exist, the MSM is behaving in a stunningly irresponsible fashion. They may be responding to advertiser pressure, and/or have a misbegotten belief that they should calm worries about gov't behavior just as they did in the lead up to the Iraq war. Even the NY Times is framing the issue as either pass this bill or "act too late" like Hoover. http://www.nytimes.com/2008/09/29/business/29econ.html?pagewanted=2&_r=1&hp Purchasing just the largest failing institutions, European-style, and working toward a New Deal style ecomomic stimulus plan is not even being mentioned as an alternative. Neither in 2003 nor now does the MSM feel that they have a responsibility to inform the public about the real dangers of going down the administration path.

[OwnedByFerrets]

1. K and R