David Corn: Slowing Down the Bailout

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Slowing Down the Bailout

By David Corn | September 29, 2008


The below item was posted shortly before the House voted against the $700 billion Big Finance bailout 228 to 225. Ninety-five Democrats joined 133 Republicans to bring down the bill. And Representative Brad Sherman was one of those Democrats.....

For my money, the $700 billion bailout plan is being rushed through Congress with too much haste. There's been little debate of the plan's basics and not much consideration of alternative approaches to the administration's preferred choice: buying up the bad paper of Big Finance firms that screwed up royally. Yet few in Washington--including John McCain and Barack Obama--want to go out on a limb. Any politician who stands up to Wall Street and opposes this thing has to fear being blamed should the plan not go through and the financial meltdown worsen. In politics, there's safety in numbers. So if everyone jumps aboard and this plan doesn't work out, nobody stands to lose politically. It's the safe political play: get on the train with everyone else.

But there are some legislators who are saying, slow down. House Republicans tried to put on the brakes last week. But their alternative--cut taxes--was a non sequitur. On the Democratic side, Representative Brad Sherman has pulled together a Skeptics Caucus. He drew 30 or so House Democrats to meetings on the weekend. Not enough to block the Paulson Express. But not an insignificant number. And Sherman released a memo detailing his objections to the bailout.

Since there's not much media coverage of the Slow-Down crowd, allow me--as a public service--to post the full document right here, The taxpayers need more, not less, of a debate, before allowing the Bush Administration to start a $700 billion spree.

From Rep. Sherman:

Million Dollar a Month Salaries
Tens of Billions to the Bank of China

The Troubling Secrets of the Bailout Bill

It is widely known that the Bailout Bill does not provide any source of revenue to pay for its enormous cost. It is equally well known that the Bailout Bill will not modify our bankruptcy laws in any way or provide any mechanism by which the terms of a mortgage can be changed without the consent of the owner of the mortgage. The purpose of this article is to outline other troubling provisions.

Stop the Panic. We do not have to pass a bad bill on Sunday. The last two sections of this article demonstrate that the sky will not fall if we don't pass a bad bill Sunday night.

Hundreds of Billions Will Be Used to Buy Toxic Assets Currently Held by Foreign Investors

Under the Bill, the Administration can buy any toxic asset from any U.S.-headquartered financial institution for any price. Some think that only U.S. investors will be bailed out.

Major foreign investors have already been assured that they can benefit from the bailout. Under the Bill, the Bank of China can sell a portfolio of toxic assets to a U.S.-headquartered investment bank on Monday, and that investment bank can then sell those same assets to the Treasury on Tuesday. The foreign financial press indicates that foreign investors are sure that they will get at least tens of billions of dollars.

The Bill should contain a provision stating that the Treasury can buy only assets proven to be held by an American investor on September 20, 2008. This provision has been rejected by the Administration, the same Administration that has promised foreign investors that they too will be bailed out.

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http://blogs.cqpolitics.com/davidcorn/2008/09/slowing-down-the-bailout.html