Entries tagged with “bailout” from Reality Window

Matt Taibbi sets the WSJ straight on disclosure standards and other facts regarding Hank Paulson's role in the recent economic turbulence we've experienced in a rant that must be read. The WSJ probably won't publish it so Matt did it for them.

Nice job, Matt.

[via]

The Morning Reaction post by kula2316 at dkos starts off summarizing all the news about welfare applications skyrocketing around the nation and then moves onto a report of Goldman Sachs' year-end results:

Um... with all the news about welfare applications skyrocketing, more and more Americans needing food stamps or food banks, numerous states slashing their budgets, and our national debt increasing by the second, what is wrong with this picture?

Goldman Sachs Group Inc., which got $10 billion and debt guarantees from the U.S. government in October, expects to pay $14 million in taxes worldwide for 2008 compared with $6 billion in 2007.

The company's effective income tax rate dropped to 1 percent from 34.1 percent, New York-based Goldman Sachs said today in a statement. The firm reported a $2.3 billion profit for the year after paying $10.9 billion in employee compensation and benefits.

$14 million, eh? On profits of $2.3 billion? After receiving assistance from the federal government?

The rate decline looks "a little extreme," said Robert Willens, president and chief executive officer of tax and accounting advisory firm Robert Willens LLC.

"I was definitely taken aback," Willens said. "Clearly they have taken steps to ensure that a lot of their income is earned in lower-tax jurisdictions."

This is insane. The article mentions $14 million in worldwide taxes. I wonder how much of that will actually go to the government that bailed them out?

"This problem is larger than Goldman Sachs," Doggett said. "With the right hand out begging for bailout money, the left is hiding it offshore."

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Oh, but I certainly hope all those Goldman Sachs execs enjoy their holiday bonuses, as The Guardian (UK) reports:

A multimillion-pound bonus pot will still be shared by workers at Goldman Sachs, which benefited from a US bank bail-out and yesterday posted its first loss since going public nine years ago.

The payout, worth around £55,000 per employee, was confirmed as the Wall Street bank blamed "extraordinarily difficult operating conditions" for a fourth-quarter loss of $2.12bn (£1.4bn). It still achieved a $2.32bn profit for the full year to November, although this was sharply lower than last year's $11.6bn.

I know there are so many things to be outraged about lately, but this really sets me off. Working and middle class Americans are losing their jobs and relying, in ever increasing numbers, on welfare or food stamps or soup kitchens. Meanwhile, Goldman Sachs takes $10 billion of taxpayer money and pays barely any taxes and then distributes its profits for bonuses. Am I missing something here or is this definitely an outrage?

What she said.

Since the economic meltdown in September, I've posted a couple of diaries, with permission, from Prof. Steven Ramirez, professor of law at Loyola University Chicago.  In the first diary, he provided an analysis -- from a law professor's point of view -- of the bailout.   The second diary outlined his further thoughts on the September financial crisis, along with his analysis of why the Paulson Bailout that the Senate passed was wrong.  

In this diary, Prof. Ramirez reviews the current economic climate, based on events since the September meltdown, reviews the lessons learned since then, and provides concrete advice & pragmatic solutions to get us on the road to economic recovery.  

Please take time to read Prof. Ramirez's insightful (and very well sourced!) analysis on the uncertain economic times we're in.

President Elect Obama has announced plans for a massive fiscal stimulus package which he hopes he can sign into law shortly after his inauguration.  Very soon our government will also take up the task of dealing with our failing auto makers and the possible request from the Bush Administration to access the second part of the $700 billion dollar Wall Street bailout bill that squeezed through Congress in October.  This comes shortly on the heels of a recent Bloomberg analysis showing that the US Government (primarily thru the Fed) has already racked up $7.7 trillion in obligations to stem the financial crisis now engulfing the world.  

Economist Brad DeLong argues that "old fashioned Keynesian fiscal stimulus" is the only way now to avoid a depression.  Nobel laureate Joe Stiglitz suggests a stimulus of up to $1 trillion because "a deep and long downturn" looms.  This year's Nobel laureate, Paul Krugman, says "I'm getting scared" because of the grim jobs numbers and the possibility that fiscal stimulus will take too long.  Krugman now sees a "depressed" global economy until at least 2011.  Krugman has posted this grim picture of the job contraction suffered at the hands of the Bush Administration:

McCain adviser, Kenneth Rogoff, sees a "collapse" in consumption that will need to be offset by $1 trillion in economic stimulus, or we could face an economic "disaster."

Thus, this much is clear: we are facing a spiraling economic cataclysm that will require trillions in government expenditures between 2008 and into 2010.  Moreover, it appears darker days are yet to come, as the real estate market gets worse and, according to the IMF, bank losses have yet to peak.

The essential problem is this:

The amount of debt in the US relative to GDP simply exploded under trickledown economics starting in 1980.  As incomes stagnated and jobs contracted (see chart above) for too many the debt burden could no longer be serviced, and a cascade of defaults starting with subprime mortgages has inexorably led to massive deleveraging.  Paul Krugman recognized the dangers of deleveraging late last summer.  Deleveraging means: banks reduce lending and hoard capital; consumers cut consumption in order to enhance savings; firms and individuals sell assets liquidate debts; businesses layoff workers to reduce expenses and reduce debt; and, severe risk aversion to conserve capital.  Deleveraging thereby leads to deflation, which creates a dangerous psychology whereby purchases are deferred in the belief that prices will continue to fall.  "Once started the process is hard to stop."

So now we stand at the brink of the Great Depression II or the Great Deleveraging and our leaders seem clueless about what to do other than stuff billions in the pockets of their pals.  The big bailout was a big bust, with inadequate oversight and no assurance that it would lead to enhanced credit flows.  The primary reason was that it allowed a massive flow of capital into the insatiable insolvency sponges at the center of our economy, whether called Citigroup, AIG or American Express.  These zombie banks who ran off the risky leverage cliff like lemmings will not lend because they know they are insolvent or will be shortly when the next massive waves of losses peak.  It seems at least theoretically likely that bank CEOs like everyone else just want to hang onto their jobs as long as possible, even if that means mass layoffs for the rest of the workforce.  In fact, Wall Street alone is poised to cut $100 billion in wages.

The GAO report (pdf) on management of the bailout released on Tuesday follows an oh-so-familiar pattern evident in the litany of failures of the Bush administration that begins with Katrina, the management of the Iraqi occupation, the DOJ politicization, and goes on and on.

TPMMuckraker, specifically Zachary Roth, has been doing an excellent job of tracking through the report and reaction to its contents. Zach made three posts in a row whose content is guaranteed to make any US taxpayer nervous if not outright sick and angry.

His first was from "page 15 of the GAO report on how Treasury is spending the bailout money":

[Treasury's Office of Financial Stability] has not yet determined if it will impose reporting requirements on the participating financial institutions that could enable OFS to monitor, to some extent, how the financial institutions are using capital infusions.

In other words, Treasury may not force banks even to tell the department how the banks using the billions of dollars they're getting. It's a no-strings-attached deal, it would seem.

Next, he notes the report's comment on oversight:

The GAO report makes clear that the urgency of the crisis has meant that oversight procedures have taken a backseat. It concludes in part:

Treasury has not yet set up policies and procedures to help ensure that [Capital Purchase Program] funds are being used as intended.

And then, this one which makes one want to weep with frustration:

Here's a bit more detail, from page 25 of the GAO report, on what seems like the Treasury's utter aversion to requiring banks to offer any information whatsoever on what they're doing with the billions of dollars of taxpayer money they're getting.

[I]t is unclear how OFS and the banking regulators will monitor how participating institutions are using the capital investments and whether these goals are being met. The standard agreement between Treasury and the participating institutions does not require that these institutions track or report how they plan to use, or do use, their capital investments.

...
With the exception of two institutions, institution officials noted that money is fungible and that they did not intend to track or report CPP capital separately.

...

The banking regulators indicated that they had not yet developed any additional supervisory steps, such as requiring more frequent provision of certain call report data for participating institutions, to monitor participating institutions' activities.

So it seems to come down to this: the banks won't say what they're doing with the money, and Treasury is too polite to ask.

Too polite? There are other words for this breach of the public trust by the Treasury Department officials. Incompetent seems mildest of them.

There's more in the report. On limiting outrageous executive compensation, Zach noted that "Treasury officials aren't even on the same page with each other about how to enforce the limits -- and some think it can be left to the banks, fox-henhouse concerns be damned."

Conflict of interest issues have surfaced as well:

The GAO report sheds light on another interesting angle to the conflict of interest problem with Treasury's administering of the bailout.

The department has hired outside private contractors to administer parts of the bailout program, notes GAO. Given the reports we've seen about Treasury lacking staff -- and lacking the right staff -- to implement the program, that may be a good move.

But as the report explains, outside contractors aren't subject to the conflict of interest rules that govern Treasury staff. As a result, Treasury asked the contractors to identify potential conflicts. There were many.

Zach goes on to quote a few of the relevant issues and conflicts and it's bad. It essentially says that the contractors hired have said there are conflicts, that some of their clients are entities that will be receiving TARP money, and yet the Treasury people have essentially said 'we trust you'll do the right thing'.

Finally TPMMuckraker reports that Pelosi and Frank had similar negative reactions to the report.

In a statement, Speaker Nancy Pelosi said:

The GAO's discouraging report makes clear that the Treasury Department's implementation of the (rescue plan) is insufficiently transparent and is not accountable to American taxpayers."

And Rep. Barney Frank, who chairs the House Financial Services Committee, agreed, saying in his own statement:

The American people received two kinds of news about the TARP program - bad and worse news.

The bad news was confirmation by the GAO in its first report about the program that Treasury has no way to measure whether taxpayer funds invested in banks are being used in accordance with the purpose of the law - to increase lending. The much worse news is Treasury's response that it does not even have the intention of doing so.

Frank added: "A public hearing on the issues raised by the GAO report is now essential."

Combine that with the willful obstruction of bailout oversight by a Republican senator, likely Jim Bunning of Kentucky, and one must conclude that Republicans want to destroy the US economy and its citizens.

The old truth "By their fruit, ye shall know them" is most germane. Based on their actions, Republicans sure as hell aren't interested in any form of responsible government and no amount of words can conceal that fact.

A block by an anonymous senator has been placed on the nomination of Barofsky to the position that would manage oversight of the bailout. After much investigative work by bloggers and journalists, it appears that the likely senate blocker is Republican senator Jim Bunning of Kentucky.

Why? Who twisted his arm to get him to do this?

Why would ANY Republican who's really concerned about the future of our country think it a good idea to block oversight of hundreds of billions of taxpayer money?

He should be made the poster boy for flagrant Republican contempt for well-managed government.

And the next time ANY Republican tells you that they're in favor of good government, laugh in their face and let them know you won't being buying that bridge to nowhere.

Barry Ritholz has found a way to bring a little reality to just how big the bailout may be. He notes that the current total cost, including the Citi bailout, "now exceeds $4.6165 trillion dollars".

People have a hard time conceptualizing very large numbers, so let's give this some context. The current Credit Crisis bailout is now the largest outlay In American history. Jim Bianco of Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures - combined:

• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion

Just look at all the items added up and know that their sum is less than the current fiasco. That's a big number. [via]

Here's another way to look at what's in the bailout, courtesy of the New York Times.

Click on image for larger graphic.

After hearing that Paulson is abandoning the plan originally agreed upon by Congress and the Bush administration with regard to the $700b bailout, the following screed from September 20th by Afferent Input takes on new meaning.

Bailouts, all. A lot has already been said, of course. But there are two things that I wanted to add to the conversation.

First, folks on the left and the right have referred to the recent onslaught of government bailouts as "socialism". On the surface, it may seem that way, given that government now "controls" vast swaths of the nation's financial system. But nothing could be further from the truth.

Let me say it more plainly; this is not socialism. Socialism is a form of government that seeks to equalize the playing field for all, insuring that that the fruits of labor are shared equally (but not fairly, necessarily. That's one of the major reasons why socialism doesn't work). Does anyone seriously think that captains of finance have embraced the philosophy of "workers of the world, unite!"? The same guys with multi-million dollar "golden-parachutes", sometimes taking home more than a billion dollars in a year. The same guys who have embraced shady accounting practices so that they and their companies pay as little in taxes as possible, sometimes percentages of income far less than the average American worker. The same guys who have broken union after union over the decades. We're supposed to believe that just this week this crew has decided to abandon Friedman and embrace Marx with open arms? Come on...

Let's look at it another way; does anyone seriously believe that the average American stands to benefit financially from the actions taken this week? That the profits of AIG, or BS, or Fannie and Freddie will be split equally amongst the masses? Of course not. Instead, tax payer money will flow from the Treasury to shore up the accounts of what should be insolvent corporations. Essentially out of your pocket and into the hands of Wall St, only making a quick pit stop in DC. Or worse, putting it on the national credit card by selling even more treasuries. This is not socialism. Instead, this more resembles a different form of societal structure: kleptocracy.

Second, how did we get to the point that simply the failure of one company would mean utter chaos for society at large? This fact alone illustrates very nicely that the financial system ceased to be a free market long before last week. The lifeblood of free markets is competition. Competition gives birth to fair pricing of goods and services as well as efficiency of commerce. If one business fails, another takes its place.

The fact that these corporations were too big to fail means they were too big. Period. If AIG couldn't hack it, then some other corporation would have stepped up to the plate. That is if the market place was truly free. But clearly it was not. Instead, what existed was, at the very least, a pseudo-monopoly. Many markets left to themselves will gradually evolve into monopolies, and one of the roles government needs to play is to insure that monopolies don't get to the point where they distort free markets to the point where they aren't really free anymore. Obviously government failed to meet that obligation in the financial sector the last few years.

I suppose that's what happens when the foxes are put in charge of the hen house. Only time will tell if the foxes can keep fooling everyone into believing that there are still some hens left.

Last week, Prof. Steven Ramirez from Loyola University Chicago contacted me to help him spread his analysis of A Law Professor's View of the Bailout.  

Today, he has further thoughts on the events of the last week, along with his analysis of the Paulson-Bush bailout Bill that the Senate will vote on tonight.  

From Professor Ramirez:

The Paulson approach is still at the core of the recently rejected House Bailout Bill and it still bails out the wrong people, in the wrong way, using the wrong logic.  It must be killed in its entirety so that an appropriate bailout can go forward.

The US Senate is poised to vote on the Paulson-Bush Bailout Bill (.PDF)  tonight.  That Bill is a fraud and seems specifically designed to stuff billions in the pockets of the very CEOs responsible for this fiasco rather than help the economy.

I spent most of Sunday reading the House bailout bill that was rejected on Monday.  Apparently few in the media spent any time reading the text of the bill because the talking heads packaged the bill in a way that was radically different from reality.  

For example, the media consistently suggested that the Bush Administration would have only $350,000,000,000.00 to start with and would need congressional approval for the other $350,000,000,000.00.  Under Section 115, however, the congress must override a presidential veto to stop the second installment--meaning a vote of 2/3 of each chamber must vote against its disbursement.  The game is rigged strongly in favor of the entire $700 billion being spent once the bill is enacted and no media outlet that I have found discusses that fact.  The Senate Bill retains this exact language.  The bottom line is once the Bill is passed Paulson has $700 billion to spend with only the thinnest of limitations.  

Similarly, the bill supposedly limits executive compensation.  In reality, Section 111 empowers Secretary Paulson to set standards on executive compensation, and he has been a vehement opponent of any limitations at all.  In addition, the standards do not apply at all to any company getting less than $300,000,000.00 in assistance, and then apply only to "new" employment agreements.  Even in a situation where the government purchases trash assets directly from a company the standards are too vague to assure any real limit on executive compensation. The Senate has not addressed this problem.

So, without getting into the rest of the gory details, suffice it to say that bill was not portrayed accurately to the public.  But perhaps the grandest fraud is that the Paulson approach is the only approach.

Early on, Paulson and Bernanke stated the Paulson bailout is the only possible bailout.  That is false.  A recent IMF study (.PDF) in fact assesses bank crises throughout history and across the world.  It demonstrates that there many different ways to proceed with a bail out.  

According to NYU economist Nouriel Roubini (the top economist on this entire subprime fiasco)  the Paulson bailout is a "disgrace and a rip-off" compared to alternatives.  More specifically: "the Treasury plan is. . .a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer."  Worse he states "the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown."  So, it seems like we pay a ton of money for "nothing" under the House Bill.

The beneficiaries of this bailout will be the shareholders of the firms that caused this mess and the directors and officers that manage those firms.  Their firms will be recapitalized with a giant slug of taxpayer funds and the managers who trashed the global financial system will remain in control.  Under the Paulson plan the most inept managers in the history of capitalism get a new $700 billion of our money to mismanage.

There have been many bank crises world wide.  There are many different ways to resolve a crisis.  Almost always current shareholders and managers must also pay up.  Sweden apparently made money from a banking system rescue by taking ownership of problem banks.

The Treasury should take the Warren Buffet approach.  The government should inject capital to save the financial system, which certainly needs saving.  In return we should take a preferred shareholder position and negotiate for preferred dividends, suspend common shareholder dividends, and obtain preferred voting rights to oust the most reckless managers and boards.  The risk to the taxpayer is minimized and the costs to current shareholders and mangers are significant.

As Nouriel Roubini and Paul Krugman each recognize this approach also has the benefit of injecting pure capital, which is the basis of all financial lending.

The difference is simply this: the Paulson plan rescues reckless bankers at great cost to the taxpayer and a government preferred share purchase program rescues the financial system with a much smaller risk to the taxpayer.

Submitted by: Professor Steven Ramirez
Loyola University Chicago
Oct. 1, 2008

On September 24th, Steven Ramirez, a professor of law at Loyola University Chicago, gave a very interesting presentation called "The Subprime Debacle & Subprime Bailouts: Subprime Enforcement, Subprime Accountability, & Subprime Responsibility."  

Professor Ramirez kindly wrote down his thoughts and sent me a copy of what he has to say about the mess and his proposed solutions for resolving it.  After you read this, you'll know more than McCain.

If you agree with his solution, please pass this information on to others and contact your senators/representatives.

The single most remarkable fact regarding the subprime debacle is the breathtaking recklessness of the lenders that now seek the most massive public bailout in the history of the US.  

As shown below, the default rates on loans originated in 2006 and 2007 exceeds 30 percent.  These loans never should have been made and no bank can survive these kinds of default rates-the losses implied from these default rates will wipe out the interest paid on the entire underlying portfolio and much bank capital.  Further, because billions of dollars of such loans were made, their rapid default destroyed the nation's real estate market.

Since 2007 It's Even Worse...

• "At the end of June, 5.35 percent of prime loans were past due or in foreclosure, up from 4.93 in March. By contrast, 30.48 percent of subprime loans were past due or in foreclosure, up from 29.53 percent."  NY TIMES, 9/5/08


• Overall, delinquencies on 2007 prime jumbo loans rose to 3.22 percent in July, while Alt-A loan delinquencies increased to 14.56 percent. . . .Defaults on subprime loans from last year hit 31.25 percent."  Reuters - 8/22/08

The line between recklessness and intentional wrongdoing is often thin.  Recklessness may include inexplicable stupidity, but sometimes inexplicable stupidity may be explained by following money.  

Here is some grist for the thought-mill from economists who are responding to the situation in our financial markets and economy and to Sec. Paulson's proposed plan.

The first is James K. Galbraith who has a column in the Washington Post today. His points are well-made.

The second is a discussion with Paul Krugman, Eugene Ludwig and Alan Meltzer on The Newshour with Jim Lehrer. The video and transcript of the discussion is here. Click on the streaming video link - you get much more from that than from the transcript. Krugman is a centrist who leans left on some points. Meltzer is a conservative. Ludwig appears to be centrist.

Their discussion is enlightening.

Then finally there's this letter posted on the University of Chicago website signed by 200 economists

9/25/2008

As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

1) Its fairness. The plan is a subsidy to investors at taxpayers' expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.

See the website for the list of signatures

Obama's press conference this afternoon in Florida concerning the current activity in Congress on the bailout bill and coordination with John McCain.

His points on being able to do more than one thing at once and the difficulties inherent in bringing two presidential nominees into a delicate negotiating process that needs a bipartisan approach were very well made.

It is evident that he is focused on doing the best for the nation and emphasized repeatedly his and McCain's development of common ground on addressing the Wall St. bailout issues. He also demonstrates the ability to handle multiple issues simultaneously, calmly and without histrionics. Calm, cool, steady, thoughtful. Sounds like characteristics we need in our next president in great contrast to McCain's bombastic and scattershot, panicked approach to his campaign.

There is speculation that McCain chose the debate delay option in an attempt to deliberately delay the VP debate and possibly end up failing to reschedule it. And after seeing the first portion of Sarah Palin's interview with Katie Couric, it's completely understandable why McCain is hitting the panic button.

And it's this point in particular in the interview that is just cringe-inducing.

COURIC: But he's been in Congress for 26 years. He's been chairman of the powerful Commerce Committee. And he has almost always sided with less regulation, not more.

PALIN: He's also known as the maverick, though. Taking shots from his own party, and certainly taking shots from the other party. Trying to get people to understand what he's been talking about -- the need to reform government.

COURIC: I'm just going to ask you one more time, not to belabor the point. Specific examples in his 26 years of pushing for more regulation?

PALIN: I'll try to find you some, and I'll bring them to you.

Actually there was more than one cringe-inducing moment but that's the one that stands out. There will be more segments of the interview released over the next few days per CBS. "Tomorrow's (25) portion of the interview will focus on international affairs. As previously announced, Couric's extended interview with Gov. Palin from the campaign trail will be broadcast on the CBS EVENING NEWS next Monday (29) and Tuesday (30)."

I think that sign from the Alaska Women's Rally said it best.

McCain / Palin
Unstable / Unable

Ben Smith has the complete transcript of the first segment of the Palin-Couric interview.

TPM pointed out this post by David Cay Johnston, "the former NYT reporter who won a Pulitzer for his reporting on tax policy". He addresses journalists but his points are equally applicable to any following what's going on in Congress and on Wall Street.

Mr. Johnston starts with this point:

In covering the proposed $700 billion bailout of Wall Street don't repeat the failed lapdog practices that so damaged our reputations in the rush to war in Iraq and the adoption of the Patriot Act. Don't assume that Congress must act instantly, as so many news stories state as if it was an immutable fact. Don't assume there is a case just because officials say there is.

The coverage of the Paulson plan focuses on the edges, on the details. The focus should be on the premise. And be skeptical of what gullible Congressional leaders, most of them up before the voters in a few weeks, say after being given a closed-door meeting on supposed horrors.

The Administration has scared the markets and some key legislative leaders, but it has not laid out a coherent, specific and compelling need for this enormous proposal, which is the equivalent of a one-time 55 percent income tax surcharge. (Instead the money will be borrowed, so ask from whom and how this much can be raised so quickly if the credit markets are nearly seized up with fear.)

Ask this question -- are the credit markets really about to seize up?

He goes onto to outline how available credit appears to be to business people of his acquaintance as well as the continued offers for credit that he's receiving personally. He asks a lot of good questions about why banks aren't renegotiating loans with people who can afford their current loan rates but not the new rates that they are about to balloon up to. He asks why ridiculous loan packages are still being offered on the internet. He asks why banks aren't working with landlords and small business owners.

Then he asks why journalists aren't asking these questions. He points out that the media appears to be going along with the administration's urging to rush through and do something.

This is one of those topics where any person not an economist or a Wall Street trader feels at a loss to discuss intelligently though all have opinions. Something must be done. But the inside word on Secretary Paulson's proposal is that it puts all the power in the hands of the Treasury Secretary with no oversight or regulation. New Deal Democrat rounded up the economists that write columns or blog in this post. Take the time to click through and read their original pieces and the message comes through pretty clearly. What's been proposed by the Bush administration is not good for our country.

It reminds one of Brownie aka Michael Brown of FEMA / Katrina fame or Monica Goodling or Alberto Gonzales. We cannot afford to place so much power in the hands of one individual with the hope that someone knowledgeable and competent is nominated for the position.

A story that someone out canvassing in northern Virginia this weekend told makes the point most clearly:

"Are you the Obama folks who just left the literature at my door?" asked the women walking purposefully down the sidewalk. [...]

"I need to tell you how I feel," said the woman as she came up to us. "I'm a Republican... well I was a Republican. I've always voted Republican in the past... but not anymore. We need to clean house. I'm voting for Obama... you need to know that. This country needs to know that!!! I've had enough!!!!!!"

"So, you're voting for a total Democratic slate?" I asked, hesitantly.

"Yes," she replied. "I work in a small government agency, and after 7 years, I've come to the conclusion after trying to deal with these Republican appointees that there are just very few of them that are competent or care a thing about what they are doing. In fact, if they screw things up, it just confirms their beliefs, since they don't believe in government. They simply need to be sent packing."

"OK, would you say you have historically voted Republican, but are going to now vote for all Democrats," said my wife as she filled out the canvass sheet. "How would you describe yourself then, a Democrat, Republican, or Independent?"

The woman thought for a few seconds, and then finally replied, "I can't describe myself as a Democrat yet... but there's no way I'm a Republican anymore. They are bankrupt. I guess I have to say that I am now an Independent."

We cannot afford to turn over so much authority to the executive branch without any oversight or supervision.