Here comes welfare for the super-rich

By Michael Fraase

Sunday, 28 September 2008 11:17AM CST

Section: Politics

CashWhy are the Democrats smiling like they just hit the lottery? Because they did. The Congressional leaders and the White House have apparently reached an agreement on the US$700 billion bailout of the super-rich. They’re overjoyed because the spotlight on them for allowing this to happen has been extinguished (they think) and they can scurry home to campaign for re-election.

When I began writing this, the New York Times had a completely different image accompanying its story, one with everyone in the frame laughing almost uncontrollably. Why was the photograph changed to the current one where everyone looks much more sedate? And why is the original image simply nowhere to be found?

And just what does the American taxpayer get for taking on this enormous, no-hope-for-a-balanced-budget ever again, staggering debt load? Pretty much a bag of rocks:

  • Limits on some (but not all) executive compensation whose firms take part in the bailout.
  • Requirements to make “aggressive efforts” to prevent home foreclosures (but no actual, specific requirements or plan).
  • Equity in some (but not all) companies that participate in the bailout.
  • Oversight by a Congressional panel (that’s right—the same Congresscritters that allowed this to happen are going to be overseeing this mess).
  • “Conflict-of-interest” rules (unspecified, natch) for the same financial firms that caused this mess who get to run the bailout.
  • Provided an option for the Treasury Secretary to issue government insurance on the toxic assets (like trying to insure a house that’s already on fire). The creation of the insurance program is mandatory but it’s implementation is not.

What a deal. Except we don’t know for sure because, as Lori Montgomery and Paul Kane report in the Washington Post, full details of the bailout plan have not yet been released. This performance, after all, is solely for the benefit and consumption of the foreign markets that open later today.

Here’s what happened, in an nutshell: The Bush administration spent months cooking up the original proposal; a proposal they knew wouldn’t pass Congressional muster and for which they admit they pulled a number (US$700 billion) out of thin air. Congress added some window dressing; certainly nothing at all onerous on the miscreants who caused this mess. And bang! the measure passes in less than two weeks. Lawmaking at its best and a perfect example of why the forefathers structured government so this wouldn’t happen.

The entire bailout was framed by two questionable assertions taken as fact:

  1. If the bailout doesn’t occur the global economy will fail.
  2. This has to happen immediately. No time for debate or consideration. Same as with all of Bush’s other “emergencies.”

Representative Barney Frank (D-Massachusetts) did a poor job of hiding his ebullience when he told the New York Times: “This was never going to be a bill that was going to make people happy. No solution to a problem can be more elegant than the problem itself. We are dealing with a very difficult problem. Given the dimensions of the problem, I believe we have done a good job. It includes genuine compromises.”

Here’s what didn’t happen that should have:

  • No surtax on the super-rich.
  • No mandatory deep discount on the toxic assets to be purchased.
  • No bankruptcy roll-back or judge-ordered mortgage modifications.
  • No economic recovery package for infrastructure or sustainable energy.
  • No re-regulation of the financial industry.
  • No breakups of companies deemed “too big to fail.”
  • Nothing whatsoever to prevent this from happening again.

The moral risk cat is now fully out of the bag and will never be recaptured. Just one question: What happens when China determines their investment in US debt is “at risk?”

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