The more I look at the Paulson "plan" the more I come to the conclusion it’s just an old fashioned stickup. A scam. The Republicans know they have only a few more months, and this is their last raid on the treasury. Republicans created this crisis, and in the way of scam artists everywhere now that there’s a crisis they’re demanding money and power to fix their own mistakes.
What I’m hearing is that the gun being held to Congress’s head is the fear of a money market meltdown. These funds are integral to the economy, yes, but 700 billion is far more than is needed to bail them out. They aren’t all going to fail tomorrow, which that number assumes – that they’ll zero out on Monday, and then a few banks will fail simultaneously. A few money market funds may break the buck, but you can deal with that with, oh, 25 billion, and with change to spare. Frankly the Fed’s Bernanke can deal with it with the authority he already has.
So the gun that Paulson is holding to Congress’s head, while not filled with blanks, is a BB gun. He’s trying to stampede Congress into giving him more money and more power than he actually needs to fix the ostensible problem by acting as if there’s no time to think through, or disaster will occur almost immediately.
Well, that 700 billion bails out Paulson’s friends and colleagues at the highest levels (most of the little people will still lose their jobs). It preserves the world that Paulson worked in all his life. It means that Wall Street and the Banking industry doesn’t have to change how they do business. The people in charge of it will stay in charge and they will stay rich.
Paulson is asking Congress for 700 billion dollars to bail out his friends and to keep his world intact. To ensure there is no meaningful reform of how the financial industry does business, or who runs it. He knows that if serious consideration is given to how to do a bailout it will include a lot of conditions, that the markets will be re-regulated and reformed, and that his friends will mostly be tossed out on their butts.
Be clear, the economy is in a crisis, but it’s not a crisis that requires the literal dictatorial powers that Paulson is asking for. He does not need to be free from all oversight. He does not need to be given 700 billion dollars now. The bailout does not even have to be done through the treasury but could easily be done through the FDIC. Conditions can be imposed on the parties being bailed out. Help could be given to ordinary people as well as banks, not just to banks. Most of all, Congress does not need to sign Paulson a blank check and legal immunity from consequences as to how he spends it.
This is a stickup. Paulson is trying to stampede the Congressional herd into giving him powers and money that he knows they would never give if they had time to think it through carefully. It worked with the Patriot Act. It worked with the AUMF. He’s betting it’ll work again. Create a crisis (or lie one into existence) then demand dictatorial powers and unlimited spending authority to deal with it.
Congress needs to not succumb to fear or to explicit or implicit blackmail. If the crisis was as severe as Paulson makes it out to be, virtually the end of market capitalism, he wouldn’t be quibbling over whether or not CEOs get to keep their golden parachutes.
In effect, that quibble is like you walking into your local bank and saying "I need you to loan me a million bucks. Here are the conditions I must insist are met before I let you lend me the money. First…"
He’s given his tell, that he’s a liar, a thief and a scam artist.
Time for Congress to call his bluff, and to see that the financial crisis is dealt with on their terms, with strict oversight by people they can trust, not by a scam artist and liar like Paulson.