It’s clear that the Bush administration has an agenda. Clearly, their actions are motivated by a plan to bankrupt the US government, making any type of government program impossible. The plan of a war in Iraq, that was senseless and enriched a few corporations such as Exxon, but killed 100,000 or so people wasn’t enough, so now they are asking for a blank check of only $700,000,000 to use to buy nearly worthless assets from rich people who don’t need government money anyway. The word for that is theft.
In any case, several of the blogs I link to feel the same way, so I’m collecting something each blog has to say about this issue. (Note that e_f spotted that this was the beginning of something big in April of 2007.)
Many have commented on the proposed theft of $700 million dollars by the present administration, but the two best comments have been at Global Guerillas and Against Monopoly. The best graphic describing the magnitude of the current crises comes from Brad deLong’s blog:
John Robb at Global Guerillas describes the present proposal as looting:
It’s instructive to view the US Treasury’s plans for a bail-out of the global financial system through the lens of the hollow state. By this measure, the bailout as it stands today, is a form of financial looting of the US Treasury (it isn’t socialism, since the government isn’t nationalizing the financial system). Trillions of dollars in government monies ($700 billion to begin with) will be infused directly into the coffers of corporations and wealthy individuals (via hedge funds). Specifically, the plan buys toxic assets at inflated prices and sells them back for nearly nothing — no equity or assets of real value are provided in exchange for the purchase. The national debt will likely grow 20-30% in a single year, with obligations extended to many trillions more in guarantees.
Given this, one potential next step forward is a decline the credit rating of US debt (which radically increases the costs of US borrowing), a collapse in the dollar relative to more stable global currencies, and a rapid decline in government services. Other scenarios achieve the same result with different timing. Regardless, our (the US and the UK) journey to a hollow state has officially begun.
And here is David K. Levine at Against Monopoly:
Here is the proposed bill. Read it. It says simply that the Treasury secretary is given a 700 billion dollar credit line and told to go out and play the mortgage backed security market, appointing whoever he chooses, and buying and selling without any oversight, concurrent or retroactive. Can I imagine a better prescription for political corruption? I’m not imaginative enough. I’m imaginative enough to think that however good the intentions of the (politically appointed) Secretary might be, the people who do the buying and selling will feel sympathetic to their friends and will want to do what they think the boss man would “want them to do” towards his friends. Some will not give in to the temptation. Others will. And on the other side those who receive lesser bailouts will think that it is unfair and driven by politics – regardless of whether or not it is.
Also definitely worth a look is the round-up of various comments at Against Monopoly found here.
And last here is Dani Rodrick, freely admitting this crises blindsided him, asking quite a few questions, that seem to deserve answers:
Where did we go wrong?
The financial crisis that has developed around subprime mortgages is so so astounding in so many different ways that, like many others I suppose, I am still having difficulty getting my mind around it. The whole thing is a big surprise for me. I would have been pretty ready to assert, as late as 6 months ago, that financial crises of this magnitude had become solely a developing-country phenomenon and that rich countries had developed the regulatory and other mechanisms that would prevent them from getting into such a mess. Yes, there would be smaller scale hiccups, such as the S&Ls or LTCM, but you certainly couldn’t have a meltdown a la East Asia 1997-98 or Mexico 1994 in an economy such as the U.S.
Now we know that I would have been wrong. What is happening in the U.S. is no different from what took place in Thailand in 1997 or in Argentina in 1999, with the entire financial sector going belly-up.