What Wall Street Should Do To Get Its Blank Check
The frame has been set, the die cast. Treasury Secretary Hank Paulson, presumably representing the Bush administration but indirectly representing Wall Street, and Fed Chief Ben Bernanke, want a blank check from Congress for $700 billion or possibly a trillion dollars or more to take bad debt off Wall Street's balance sheets. Never before in the history of American capitalism has so much been asked of so many for (at least in the first instance) so few.
Put yourself in the shoes of a member of Congress, including our two presidential candidates. The Treasury Secretary and Fed Chair have told you this is necessary to save the economy. If you don't agree, you risk a meltdown of the entire global financial system. Your own constituents' savings could go down with it. An election is six weeks away. Besides, in the last two days of trading, since rumors spread that the Treasury and the Fed were planning something of this sort, stock prices revived.
Now - quick -- what do you do? You have no choice but to say yes.
But you might also set some conditions on Wall Street.
The public doesn't like a blank check. They think this whole bailout idea is nuts. They see fat cats on Wall Street who have raked in zillions for years, now extorting in effect $2,000 to $5,000 from every American family to make up for their own nonfeasance, malfeasance, greed, and just plain stupidity. Wall Street's request for a blank check comes at the same time most of the public is worried about their jobs and declining wages, and having enough money to pay for gas and food and health insurance, meet their car payments and mortgage payments, and save for their retirement and childrens' college education. And so the public is asking: Why should Wall Street get bailed out by me when I'm getting screwed?
So if you are a member of Congress, you just might be in a position to demand from Wall Street certain conditions in return for the blank check.
My five nominees:
1. The government (i.e. taxpayers) gets an equity stake in every Wall Street financial company proportional to the amount of bad debt that company shoves onto the public. So when and if Wall Street shares rise, taxpayers are rewarded for accepting so much risk.
2. Wall Street executives and directors of Wall Street firms relinquish their current stock options and this year's other forms of compensation, and agree to future compensation linked to a rolling five-year average of firm profitability. Why should taxpayers feather their already amply-feathered nests?
3. All Wall Street executives immediately cease making campaign contributions to any candidate for public office in this election cycle or next, all Wall Street PACs be closed, and Wall Street lobbyists curtail their activities unless specifically asked for information by policymakers. Why should taxpayers finance Wall Street's outsized political power - especially when that power is being exercised to get favorable terms from taxpayers?
4. Wall Street firms agree to comply with new regulations over disclosure, capital requirements, conflicts of interest, and market manipulation. The regulations will emerge in ninety days from a bi-partisan working group, to be convened immediately. After all, inadequate regulation and lack of oversight got us into this mess.
5. Wall Street agrees to give bankruptcy judges the authority to modify the terms of primary mortgages, so homeowners have a fighting chance to keep their homes. Why should distressed homeowners lose their homes when Wall Streeters receive taxpayer money that helps them keep their fancy ones?
Wall Streeters may not like these conditions. Well, you should tell them that the public doesn't like the idea of bailing out Wall Street. So if Wall Street doesn't accept these conditions, it doesn't get the blank check.
Please pass this along. You must email your senators and your congressman today. George Bush is trying to steal our money and our government. Do not let that happen. Read the following:
"Sec. 8 Review. Decisions by the Secretary pursuant to the acts of this act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administratve agency."
They are trying to push this down the throats of Congress quickly...do you realize the implications?
The Treasury Sec acting for Bush will have sole authority over taxpayer's money without Congress or the courts to question. This defies our constitution. This is too important to fluff away. Here is the email addresses for your senators and congressman. Please write today.
http://www.senate.gov/general/contact_information/senators_cfm.cfm
https://forms.house.gov/wyr/welcome.shtml
Here's what I said.
"Sec. 8 Review. Decisions by the Secretary pursuant to the acts of this act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administratve
agency. "
I call upon my elected officials to stop this from becoming law. This power shall not be given to the Secretary of Treasury. We are watching you defend our constituion not throw away our rights.
If our democracy is to survive you cannot cave to this measure. The Congress can continue to work with the executive branch to save our financial system but you must work together not give one person this power. It is against everything we stand for. ENOUGH IS ENOUGH. SAY NO TO SECTION 8.
Please send this to as many people as possible and tell them to send it to as many people as possible before it is too late.
September 21, 2008 2:05 PM | Reply | Permalink
Now way, no how, no bailout.
I think this is a bad idea because it enables this $700 billion gift to Wall St. There is no need for a $700 billion bailout by the taxpayers. There are so many other options, but they are not favored because none of the others riches for the fools who got us into this mess. I came up with 3 better ideas in about 20 minutes.
1) Loan $50 or $100 or $200 billion to GE & Berkshire Hathaway for the sole purpose of buying debt worth less than $0.75 on the dollar. They are good for it, and better than that, they won't spend the money if the market doesn't warrant it.
2) Appoint 1/2 dozen hedge funds to compete for this toxic debt. They hedge funds would put up 10% of the capital and the feds can put up 90%. We'll even give the hedgies a 1% management fee. That way, there will be a strong incentive to pay a fair price for the securities instead of oerpaying as we are bound to do.
3) Tell the 20 biggest banks that the Fed is buying 20% of your company at Friday's closing close. We get a 20% stake, the banks get the cash we need, and we divest over time.
Yet, instead of that, we are proposing a system where only the taxpayer's money is on the line, where the taxpayers will no doubt overpay for the debt, where the taxpayers get nothing in return. Not on my watch.
Now way, no how, no bailout.
September 21, 2008 3:03 PM | Reply | Permalink
See post, link below - Obama says No Blank Check
September 21, 2008 6:29 PM | Reply | Permalink
Here's a way to rebut the bluff by the Bush thugs:
http://www.huffingtonpost.com/dave-winer/theyre-bluffing-unless-bu_b_128117.html
September 21, 2008 7:31 PM | Reply | Permalink
This is excellent, especially about closing the PACs. Wall Street should give up its political influence if it's going to beg politicians for a bail out.
But I'd add one more thing to it -- if the public is to take equity stakes in these companies, then the government should show up at shareholder meetings and vote our interests. We're more than mere stakeholders now. So the government should be able to push forward shareholder resolutions that would force the banks to run green oeprations, to invest in alternative energy, not to do deals with our enemies, not to advise on mergers that cost American jobs.
We're not here to save Wall Street, we're here to take over.
September 21, 2008 2:09 PM | Reply | Permalink
Your ideas are sterling, simply enacted, easily enforced and going no where. If anything has become abundantly clear in the last 14 years is representative governance is dead. We are governed for plutocrats and corporations, and although the plutocrats and corporations got us in this financial mess (through deregulation), those are the entities we are bailing out.
September 21, 2008 2:10 PM | Reply | Permalink
Yes.
Forwarded to my Congressman.
Also to my useless Senators (DeMint and Graham).
September 21, 2008 2:10 PM | Reply | Permalink
Ditto Boxer, Difink and Lungren
September 21, 2008 2:15 PM | Reply | Permalink
NO BLANK CHECK!
That's a slogan that will work!
Call every Senator and Rep on Monday morning!
September 21, 2008 2:11 PM | Reply | Permalink
Great idea. The push against Bush's Social Security plot was keyed around the drive to "Save Social Security". I think this is a slogan that can drive the point home on this atrocious new plot to screw the average American taxpayer.
I like Mr. Reich's ideas, but I think the one about closing the PACs is a non-starter. Not that I don't like it, but they'll all start screaming about their First Amendment rights. But, what the hell, I say we push for it anyway.
September 21, 2008 2:27 PM | Reply | Permalink
If only, Mr. Reich. If only.
September 21, 2008 2:15 PM | Reply | Permalink
Reich nailed it. Here's the plan that the country, and Obama, need. Please help make this viral.
September 21, 2008 2:17 PM | Reply | Permalink
This issue is a litmus test for Obama and the Democrats. If the Democrats can't write their own plan like the above and put someone other than Paulsen in charge they might as well call themselves 'Loyal Bushies'.
The Bush/Paulsen plan is nothing less than a game of extortion on the American taxpayer.
September 21, 2008 2:21 PM | Reply | Permalink
As usual, good advice.
But you can forget it.
Steamroller will prevail.
September 21, 2008 2:24 PM | Reply | Permalink
I suggest everyone sends a form of this article to their congressperson. I just did. I referenced this article, but stated the points explicitly. Feel free to copy and paste:
September 21, 2008 2:26 PM | Reply | Permalink
i stole your letter and sent it to Webb, Warner and Goodlatte
thanks
September 21, 2008 3:21 PM | Reply | Permalink
I sent my own version to Salazar and Allard.
September 21, 2008 6:55 PM | Reply | Permalink
They have been watching this happen for years and probably assumed it would happen after they left office. Surprise! This blank check request is nonsense. This is typical "sky is falling" deadline bullshit - often used in difficult negotiations. I don't believe for a minute that we cannot wait a few days for cooler heads to prevail and for the people who will be accountable for this decision to be more comfortable in making said decision. While I think the worldwide economic situation is approaching "dire" I also think Bush and Cheney view this as one last opportunity to once again raid the treasury for their cronies. I urge our lawmakers to take a reasonable amount of time to be comfortable in deciding to put the taxpayers on the hook for this sum.
September 21, 2008 2:28 PM | Reply | Permalink
you're right, the bush administration exists to steal. even all the macho posturing, ostentatious piety and power-grabbbing are just to further the criminal enterprise. theft, that's all it's ever been. this is the cherry on top. will obama step up on this one?
September 21, 2008 2:35 PM | Reply | Permalink
Anytime Bush declares a need for quick 'emergency' legislation within 60 days of an election, you can be sure it is just another Republican political scheme to raid the Treasury and in this case buy enough quiet in the markets to get past Nov. 4th.
September 21, 2008 3:12 PM | Reply | Permalink
Without a doubt this move by Treasury, The Federal Reserve and our elected officials is going to be the largest transfer of wealth from the middle class to the richest 1% of the population who can well afford the hit considering the billions they have made in gaming the system for years.
When the politicians keep telling us that this must be done or the consequences would be even greater, they are using nothing other than scare tactics ( Schock Doctrine ) to get the American people to go along. There is another way out of this that won’t cost us a dime, but I’ll tell you why they won’t do it.
When our country was founded, the fonders very clearly stated in the Constitution that there was to be a US Tureasury with coin in both gold and silver. That held for nearly 170 years until in 1913 the Federal Reserve or central bank was created and we then went to a fiat system which we have today with trillions of paper dollars with nothing to back them floating around the world.
Presently Congress which controls weights and measures states that all of the US gold holdings are only worth $42.50 an ounce when the rest of the world says gold is worth $900 and ounce currently. All Congress would have to do is to re-value that gold to the current market price. The Federal Reserve has already used half of its reserves to bail out all of the banks that have failed to date, so why buy them out on the taxpayers back for 700 Billion? Because our wonderful politicians who have grown accustomed to sucking off the teet of the bakers can continue to keep all of us an endentured slaves to a system of continuous debt. Without the Federal Reserve which is nothing but a cartel of private banking concerns, the American people would no longer have to pay outrageous interest rates so that the bankers can get fatter on our hard work and sweat which is not what the founders envisioned. Cut off the head of the hydra known as the Federal Reserve and many of our current problems simply disappear.
The bailout in its current form doesn’t even allow Congress or a court of law to review the process and gives unlimtied power to one man. Paulson, who should have been kicked out of office along with Bernanke because they were well aware of this financial tsunami over a year ago and did nothing to stop it.
If any of you reading this have a free moment to contact your Congressmen and Senators, thell them that if we truely live in a society that is supposed to have free markets, then DON’T allow them to steamroll this through as the did the Patriot Act in the dark of night. Many in Congress never even read the bill.
Time is short everyone, but there is another way. Stop and think about it. Why is our gold only worth $42.50 an ounce when the rest of the world says it is worth far more. The revaluation of our gold, can buy out the Fed and send them back to hell where they belong. Jefferson knew this. The Republicans under Nixon closed the gold window in 1971, and since that time, the dollar has lost 95% of its value.
If you want to continue being a slave to the debt masters do nothing. If your in agreement, get on the phone, write a letter, send an e-mail or fax, but do it now as this proposal will be out of the house this week and then onto the Senate waiting for the signature of the ultimate crook in chief. George W. Bush.
September 21, 2008 2:33 PM | Reply | Permalink
"Without a doubt this move ... is going to be the largest transfer of wealth from the middle class to the richest 1% of the population who can well afford the hit considering the billions they have made in gaming the system for years."
It should be matched by a 90% plus tax on all earned income above $1 million per year and total confiscation of all bonus and stock-related income for top executives, with no golden parachutes.
Also no retirement benefits for executives and Directors greater than 200% of the median benefit to the employees of the firm.
If the bankers who caused the problems and their successors are going to get taxpayer money, then they should also fund as much of that lagniappe as can be extracted from them. That's what the IRS is going to do to the rest of us.
We taxpayers are the sheep the Wall Street bankers are fleecing. The bankers need to join us in our misery. No exceptions.
September 21, 2008 3:38 PM | Reply | Permalink
Question: How much of this bailout can Obama overturn after he takes office? Suppose Pelosi and the rest continue to act like scared little fraidy cats... Can Obama come back and strike some things from this Act, then recoup better terms for taxpayers? I mean, George Bush does this all the time for his evil deeds (torture signing statements, etc...), so why can't Obama do it for the forces of good?
Or will all of the $700billion ba debt fund already be used up before January 20th?
September 21, 2008 2:35 PM | Reply | Permalink
i think jan 2009 is too late. obama has to leverage his leadership of the party to turn this into a Financial Accountability Act that McCain won't support due to its anti-foreclosure provisions. then mcCain can explain he would have supported it if it were a clean wall st. bailout.
September 21, 2008 2:41 PM | Reply | Permalink
benjoya hussein: Agreed; and I like the political jujitsu as you lay it out.
I was just hoping for an exit clause / backdoor way around the inevitable politization of this meltdown by the GOP (ie - Killers of Capitalism). Looks like there's no way around it. They will call us Tax & Spenders & Job Killers, and we must fight openly, aggressively, with the truth and righteousness on our side. Financial Accountability Act is a great name for it.
Jesus Christ the country's at stake here. And the timing couldn't be worse.
September 21, 2008 3:00 PM | Reply | Permalink
Is the timing bad?
This is done on the Republican watch. You can tell by the way the Republican Congresscritters are laying low and not saying anything especially inflammatory.
What happens if the Republican obstruct a bill seven weeks before the election? Everyone knows something has to be done.
What if this had happened next Spring and Obama were President?
I don't trust any living Republican, but the voting public is being made aware of the situation right before the election.
September 21, 2008 3:50 PM | Reply | Permalink
Richardxx: Timing is bad b/c this can and will be politicized in the slimiest and nastiest way possible precisely when we need serious and forward looking solutions. Obama could fix from the oval office on 1/21/09, but he can only push, suggest and work behind-the-scenes levers now and hope the GOP doesn't pervert this thing into something even worse than we know it's already going to be.
They have a way of taking a grave situation and making a boondoggle out of it (like, say, 9/11/2001.).
September 21, 2008 3:56 PM | Reply | Permalink
Ward
We're talking about conservatives here. EVERYTHING is always politicized in the nastiest most toxic way if they think it can be turned to their advantage.
In this case, the timing is worse for them than for civilized human beings. Everyone else is going to look at them and realize what low-life slime they are to prevent reaching a solution because they think they can hold everyone else up to ransom.
My dad once pointed out that there was a good reason why the nation did not trust the Republicans with control of the House of Representatives for four decades after 1954. It had to be a new and ignorant generation of voters to give Gingrich his win.
They're doing it again.
September 21, 2008 9:12 PM | Reply | Permalink
right.
this vote for offensive garbage now and maybe you can fix it later stuff is chickenshit nonsense.
real leaders stay out in front. fearlessly cutting through the scare tactics.
obama gave away my rights with the fisa revisions and retroactive immunity. for that i don't think i can bring myself to vote for him. if he gives away my money with this 'bailout'/giveaway boondoggle, i will actively campaign against him.
obama needs to get out in front against this and quick so that the rest of congress can follow his lead. that's what being president is about. and that's what being your party's nominee for president is about.
September 21, 2008 3:37 PM | Reply | Permalink
fkaZk0sm0: Let's be clear: I'm not suggesting capitulation, I was looking for a way Obama can sop up this mess if we don't get enough concessions (we have to get at least some concessions).
I want them to fight. Indeed, fighting and winning something/anything on the public's behalf is what we need for Obama to win.
But don't chicken$hit out of this fight if he only gets 3 out of 7 concessions. It is NOT OK to actively campaign against Barack and cry about your rights. GET IN THE FIGHT! HELP OBAMA WIN THIS THING!
BTW - he IS in front on this:
--Only national leader running for office who took Questions from the press in the heat of the crisis - http://www.youtube.com/watch?v=ubBFIw6HedQ
--Responding to President By-Stander's Saturday Radio Address yesterday - http://www.youtube.com/watch?v=RWpWnYvBT84
September 21, 2008 3:49 PM | Reply | Permalink