Y'All Fuckin' With My Money Now. And My Money Don't Like Being Fucked With

Apparently the line from the White House that is being snuck into news reports about this bailout plan is that the US could turn a neat little profit on it at some time in the future. There is one paragraph from the LA Times front-pager on the topic that put the lie to that:

The only limitations would be that Treasury's stock of troubled assets could not total more than $700 billion at any one time, that the buying program would end after two years, and that Paulson or his successor would regularly report to Congress. Moreover, though the proposal says Treasury's new authority would expire after two years, the history of past grants of emergency power suggests that Congress finds it hard not to renew them.

And so you see how this would go. President Paulson spends $700 billion on crap assets in about a week and a half. Whenever one is sold, the government can buy another one. And if it's the banks in association with the guy who used to run Goldman Sachs deciding what constitutes an "illiquid asset," you can pretty much be sure that the government will be out $700 billion at all times. They can even buy assets that have nothing to do with the mortgage crisis, or in other words, whatever they want. And given the difficulty stopping "emergency" programs like this, that will continue in virtual perpetuity. This is a direct addition to the national debt, and no profit will ever be made.

As Calculated Risk says:

Think of a drunk gambler at a slot machine. He starts with $100 and slowly loses. Every now and then he wins some money, but he keeps putting the coins back into the slot until he has lost everything. That is how this plan will work.

Unless there is a dramatic changes, there will be no upside participation in the financial companies for taxpayers, and the taxpayers will recapitalize the banks by, in Krugman's words, "having taxpayers pay premium prices for lousy assets".

Of course, the other issue is that there are virtually no reforms to safeguard the taxpayer from having to do this again down the road, and the Big Money Boyz have deployed their assets to keep it that way. The White House is making explicit that trying anything like making CEOs foot some of the bill for their own terrible decisions would be a poison pill. The PR machine is actually trying to make you feel sorry for these clowns.

"A lot of those people will have to sell their homes, they're going to cut back on the private jets and the vacations. They may even have to take their kids out of private school," said Frank. "It's a total reworking of their lifestyle."

He added that it's going to be no easy task.

"It's going to be very hard psychologically for these people," Frank said. "I talked to one guy who had to give up his private jet recently. And he said of all the trials in his life, giving that up was the hardest thing he's ever done."

It's pretty clear what's going on here, and none of it is any good. "Shock doctrine" is not a sufficient phrase to deal with what President Paulson wants.



The 110th Congress has had a number of defining moments and failed every time. Some of them are talking a good game anonymously but that needs to translate into constructive action. President Paulson is desperate to get his friends off without a scratch, and so he ought to be made to eat whatever Democrats want to feed him.

Call your member of Congress today, later today and on Monday morning and let them know how you feel.

...Obama is going to say this today in Charlotte:

As of now, the Bush Administration has only offered a concept with a staggering price tag, not a plan. Even if the U.S. Treasury recovers some or most of its investment over time, this initial outlay of up to $700 billion is sobering. And in return for their support, the American people must be assured that the deal reflects the basic principles of transparency, fairness, and reform.

First, there must be no blank check when American taxpayers are on the hook for this much money.

Second, taxpayers shouldn't be spending a dime to reward CEOs on Wall Street.

Third, taxpayers should be protected and should be able to recoup this investment.

Fourth, this plan has to help homeowners stay in their homes.

Fifth, this is a global crisis, and the United States must insist that other nations join us in helping secure the financial markets.

Sixth, we need to start putting in place the rules of the road I've been calling for for years to prevent this from ever happening again.

Sounds OK in the main, but the question is whether he's willing to fight for it. Or rather, signal to his party to fight.