Remember late in September, Congress had to pass a $700 billion dollar rescue plan to keep our economy from financial ruin? Well, that emergency plan eventually passed on Oct. 2nd. It grew from its original 3 pages to 450 pages. It also grew in scope: no longer was it a $700 billion blank check, it now included lots of pork!
In the month and a half since passage, the stock market continues to head downward. More companies, states, and cities are lining up with their hands extended for bailout cash. Every week it seems the bailout bill morphs into something other than its original purpose: (My emphasis throughout.)
Originally intended as a program to largely mop up bad debt
related to the home mortgage crisis, Paulson last week
redefined the program so that it focuses more direct capital
injections into banks and consumer-related debt.
Watching Treasury Secretary Hank Paulson Explain[s] the Financial Crisis is not at all reassuring. (The following are some excerpts, not word for word, but pretty close to what was said. Time stamp notes that section.)
Paul Gigot asks: What can you tell taxpayers they have received for their $700 billion?
What I can tell taxpayers is that the financial system has been stabilized. We never promised that this rescue package would solve all the ills of the economy or that the govt. could push a button. ...it was passed on Oct. 2nd ...by 10 days later we had $115 billion out the door to those banks. ...the system is stabilized...
5:00 You will make an adjustment in your rescue plan to no longer buy those troubled bank assets.Those toxic assets on the balance sheets are still a problem, aren't they?
They sure are and this was a good idea when we conceived the plan, and it is still a good idea...
By the time Congress passed the law, it was pretty clear that the situation was more severe...the best way to use these funds is to focus on capital and so we announced... to hold back more funds so they would be available for capital.
6:50 ...some of those $700 billion into consumer finance areas like, auto loans, student loans, and credit cards.
This isn't a firm proposal. In our economy 40% of consumer lending takes place outside of banking industry.
...The concept here is a federal reserve liquid pool.
[8:38 Paulson gives the example of an investor coming to the Fed. with a AAA rated student loan paper ...]
10:45
Auto makers to tap into rescue fund? ...if Congress changed the law, is that a good use of that money?11:00 That is not the intent, it is not to be all things to all people. It is to deal with the financial situation. Perhaps that Department of Energy bill passed by congress of $25bil for auto industry, perhaps that could be modified to help.
11:32 How long is the govt. going to be a share holder in a lot of these institutions and the danger of politically directed credit. As you look at this into the next presidency, how long do you think the government should try to keep a stake in these things? 1 year, 5 years, 10, forever?
11: 50 Certainly not forever. No longer than is necessary. We've structured this program to be not obtrusive. We've structured it to not crowd out private capital. We've taken preferred shares and the warrants in common wont be voted...and hired asset managers. This is about getting capital into banks, to help the US economy and stabilize the system. This is anything but a program to come in and nationalize or have the government be there for a longer term. It is very different from other programs you've seen described that have taken place in other countries around the world and some of the programs designed in Europe.
I don't know about you, but I don't feel all that assured that Paulson even knows what this bailout is supposed to be. Do I trust him that these bailouts aren't nationalizing our banks and other industries? Remember How Paulson forced bail-out on the banks?
...US Treasury Secretary Hank Paulson strong-armed America's big banks into signing up for the bail-out plan.
... Why was this necessary? he [Wells Fargo's Kovacevich] asked. Why did the government need to buy
stakes in these banks?
Paulson, who yesterday made clear his own distaste for the bail-out plan,
told the Wells Fargo chief and his fellow bank bosses that it was for
their own good, and the good of the country
Wells Fargo was not in need of a bailout, but they were strong armed into signing on before they could leave the meeting.
So who decides where the money is used, the Congress or Paulson? The bailout bill congress wrote and approved gave Paulson control of the project*. So why is the Congress discussing auto bailouts for the $700 billion if Paulson isn't in favor?
One thing that is clear: Secretary of the Treasury Paulson is a very powerful man right now, and it seems he thinks he is king. And why wouldn't he?
We are venturing into uncharted waters right now, hang on mates, there be rough waters ahead.
*It is much the same when voters last spring gave Elmbrook $62.5 million for the referendum. We approved it, the board decides how the money is to be used.
Please, comment content should relate to the subject of the post. Although I try to respond to many, do not interpret my lack of a response as agreement.
Links:
Brookfield7, Fairly Conservative, Vicki Mckenna,
Jay Weber, The Right View Wisconsin, Mark Levin, CNS News
