WOW - Obama Had Better Step In

The gory details of the Treasury Department's plan to bail out the banks is now up:

But here's all you need to know. Hank Paulson is asking for $700,000,000,000. That's $2,333 from every man, woman, and child in the United States.

In exchange for that money, Paulson is unwilling to accept any demands to make markets more transparent, limit executive compensation, or assist homeowners fighting foreclosure. The sole purpose of that $700,000,000,000 is to bail out Wall Street and only Wall Street, but not to fix it, or our larger economy.

He is asking to be absolutely unbound by any law when he spends that money.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

The only "string" attached is a semi-annual Congressional report--one in which they would have zero leverage to influence his choices.

We are talking about near-dictatorial powers for President Paulson to spend $700 billion in taxpayer money, almost entirely at his discretion. Does Congress exist?

Once again, like with the FISA bill, there's only one man in America who can stop this immediately, and if he doesn't, he'll be a caretaker President:

It is the defining moment in Obama's presidency and he hasn't even won the election. The US Congress is poised to give Hank Paulson, a Bush appointee, 700 billion dollars and dictatorial powers free from judicial review or any constraints, to bail out the banking sector. Ordinary citizens, having gone bankrupt, lose their houses. Banks, having gone bankrupt, will be bailed out, and the same people who caused them to go bankrupt will be left in control of them, so they can run them into the ground yet again.

If Obama does not tell Reid and Pelosi to stop this bill, he will be reduced not just to clean-up duty for the Bush administration, which was always going to part of his job, but he will do that cleanup on Bush's and Paulson's terms. If Obama would prefer that ordinary Americans should also get some help, too bad. If Obama would prefer that bank CEOs who ran their companies into the ground should lose their jobs, too bad. If Obama thinks that reforming the financial system is necessary as a condition of bailing it out, too bad.

It's clear there needs to be some manner of intervention in the markets, mainly because the investment firms will stamp their little feet and refuse to lend money to each other if there isn't. But that must come at a cost - with a reward for the ordinary folks who are going to be hurt by seeing the Treasury drained and the money given to bad actors. There has to be some manner of balance here. People are going to get hurt and need some cover. Thus far Obama has talked about a need for bipartisanship. He needs to know that Bush and Paulson are completely uninterested in that, and if he doesn't speak up he'll get played and spend his first term hogtied by Bush.

Dean Baker has some good thoughts on how to do this responsibly. Key grafs:

1) Every effort should be made to ensure that the financial institutions bear absolutely as much of the cost of these bailouts as possible, thereby minimizing the cost to the taxpayer. This is important not just to protect taxpayers. The managers who got their institutions and the country into this housing and financial crisis exercised extremely bad judgment. They should be forced to face the consequences of their actions. Similarly, the shareholders who benefited on the upside of the housing bubble should be forced to experience the downside that resulted from risky investment strategies.

Without details of the plan, it is difficult to say how best to accomplish this task, but one obvious way is to have an equity stake be the price of admission to the auction system. For example, any company could be forced to sell itself to the government in proportion to the assets it puts up at auction. For example, if the government buys $10 billion of its junk-rated mortgage backed securities, then it gets an equity stake in the company of $2 billion. This would also get around the issue of having foreign financial institutions get into the mix. If UBS or other foreign banks want to sell themselves to the U.S. government, they can be given that option.

We need some outrage whipped up this weekend.