Turn the Bailout Shit into Campaign Reform Salad

Could the blatant greed-a-thon of the Wall Street "bailout" finally spur the switch to fully public campaign financing?

Gregg Easterbrook reveals how giveaways to special interest groups force taxpayers to fund those interests' campaign donations to politicians. So we already have indirect public financing of campaigns, only at far, far greater cost than if we just directly funded campaigns.

Why do members of the national legislature give away your money as fast as it can be borrowed? Because they want campaign donations. Polls show Americans don't like the idea of public funding for House and Senate elections, because it seems like a giveaway. But the public already funds congressional elections, just in an incredibly overpriced, inefficient way.

Members of the House and Senate give away billions of dollars in subsidies and tax breaks to special-interest groups, in order to get back thousands of dollars in campaign donations. The $150 billion or so in sweetheart handouts in the bailout legislation will probably result in several million additional dollars given to House and Senate members as campaign donations. It would be far, far cheaper for taxpayers just to fund congressional campaigns!

Suppose the public funded each House race at $1 million (435 races every second year) split between the parties, and each Senate race at $5 million split (roughly 34 races every second year), then banned campaign contributions. (Skip whether the Supreme Court would allow the latter, this is a thought experiment.) The cost would be about $600 million every second year, when there are national elections. That's peanuts compared to the amounts House and Senate incumbents give away to PAC-backed lobbies in order to inspire campaign donations. Federal financing of House and Senate races would save the public tens, if not hundreds, of billions of dollars.

Read the whole thing.

Cross-posted at They Gave Us A Republic ....

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Get That Alcoholic Another Drink

That U.S. Senate - what a hoot!

It's looking at an out-of-control drunk behind the wheel of the economy, careening down the street mowing down pedestrians left and right and what does it do?

Offer it free drinks for life!

Seriously. Fix the unbound greed on Wall Street with - tax cuts!
I've got a better idea - tar and feathering.

Too much? OK, here's a real solution that doesn't reward criminals.

(More after the jump.)

Oregon Congressman Peter DeFazio says, correctly, that the problem with the Democratic speaker's bailout measure, which the House rejected by a 228-205 vote – with progressive Democrats joining fiscally conservative Republicans to say "no" – is that it "is still built on the Paulson-Bush premise."

DeFazio, a Democratic dissenter, says that the bill Pelosi tried to get the House to back Monday demands that taxpayers take on too much of the risk which creating openings for Wall Streeters to pocket millions (perhaps billions) in federal dollars. While the Pelosi plan may put some limits on so-called golden parachutes, it still allows for what DeFazio describes as "camouflage parachutes"--hidden payouts to the corporate CEOs who created the crisis.

"We can do better," says DeFazio. "We should start again on a new package."

That's exactly what the Oregon populist is doing with a new proposal, the "No BAILOUTS Act" (Bringing Accountability, Increased Liquidity, Oversight, and Upholding Taxpayer Security). Introduced Tuesday with co-sponsorship from some of the most outspoken critics of the Paulson machinations – including Ohio Democrat Marcy Kaptur, a leader of the anti-bailout movement in Congress – the measure would impose a securities tax equivalent to one quarter of one percent of profits and empower the Federal Deposit Insurance Corporation to deal more effectively with bank failures.

SNIP

Say Congress spends $700 billion of taxpayer money on the loan purchase proposal. What do we do next? If, however, we implement the program suggested above, we will have $700 billion of dry powder we can put to work in targeted tax incentives if needed to get the economy moving again.

The banks do not need taxpayers to carry their loans. They need proper accounting and regulatory policies that will give them time to work through their problems.

DeFazio, Kaptur and their allies essentially agree. So, too, does the powerful Service Employees International Union, which has endorsed DeFazio's proposal.

"We finally have a plan that will restore confidence in the financial markets without writing a blank check to the same Wall Street banks and CEOs who got us into this mess," said SEIU President Andy Stern. "This is an important, short-term solution that protects taxpayers and their savings accounts. To revive the economy over the long-term, we must address rising unemployment, stagnant wages, the healthcare crisis, and a tax system that is tilted in favor of the wealthy."

Read the whole thing.

Cross-posted at They Gave Us A Republic ....

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Bailout Is Unsavory, But Doing Nothing Is Worse

There's plenty of blame to go around now, and yours truly is going to be among the first to point a finger. Back in 1984, I had a political opinion column for a short time (until we got a Republican owner) for a small-town daily paper. I was forecasting 24 years ago that the trend toward deregulation was a recipe for disaster.

OK, I told you so. Now we've got an economic train wreck, though, and blame should be sorted out later. Let's clean up the damage first.

Today the U.S. House defeated the proposed $700 billion financial markets bailout, 228-205. To set one piece of the record straight, the opposition was about two-thirds of House Republicans and about 40 percent of House Democrats. Call me distrustful, but I suspect that the House Republican opposition had less to do with small investors and borrowers on Main Street and more to do with big campaign contributors on Wall Street.

Onward.

I don't enjoy seeing the latter bailed out any more than anyone else with a populist streak. But it's times like these when Americans should see clearly what it means to be a "community." Rich or poor, or in between, we sink or swim together when it comes to national survival. Irresponsible wealth is mostly to blame for this. But as one of those small investors and borrowers on Main Street, I can tell you that my future, and that of others like me, will be the likely price of inaction.

There will be no way for lawmakers to work out an ideal solution for this. But this bill sounded somewhat reasonable, based on general descriptions available since yesterday.

Congress returns to session Thursday. If there was ever a time to call and e-mail your congressperson, this is it, and in favor of action, not inaction. These louts have pensions and health care for life -- they don't have to worry about where their food and medicine are coming from. Let's get them back in Washington and at the table, to forge an acceptable compromise.

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Bailout Snark Roundup

Berkley economist Brad DeLong has an idea:

This Republican Party needs to be burned, razed to the ground, and the furrows sown with salt...

Commenter Steve Jones reminds us:

...and don't forget to urinate on the ashes.

Princeton economist and NTY columnist Paul Krugman predicted today's failure on Friday:

And after the way the Bushies and their allies double-crossed the Democrats again and again in the aftermath of 9/11 — demand national unity, then accuse you of being soft on terrorists anyway — there's no way Pelosi and Reid will do the responsible but unpopular thing unless the Republicans agree to share ownership.

So what we now have is non-functional government in the face of a major crisis, because Congress includes a quorum of crazies and nobody trusts the White House an inch.

As a friend said last night, we've become a banana republic with nukes.

And finally, Barney Frank calls the repug whiny-ass titty babies out for the whiny-ass titty babies they are:



Cross-posted at Blue in the Bluegrass.

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Too True for Satire

From Christopher Hayes at The Nation:

I almost missed this email because it was diverted to my spam folder. But apparently Paulson is sending this around:

Dear American:

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

Yours Faithfully Minister of Treasury Paulson

(UPDATE: I didn't write this. It was sent to me by a friend and is making the rounds)

Cross-posted at They Gave Us A Republic ....

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TMQ on the Bailout

Gregg Easterbrook, writing as Tuesday Morning Quarterback, nails the absurdity of the proposed Wall Street bailout.

Gimme! Gimme! Gimme! Last week, TMQ asked why no one was paying attention to the fact that the national debt ceiling was quietly raised by $800 billion during the summer. Well, toss that column: The White House just asked the national debt ceiling be raised another $700 billion, for the proposed financial-sector bailout. If that happens, in 2008 alone, $1.5 trillion will have been added to the national debt: every penny borrowed from your children and their children. Stated in today's dollars, in 1979 the entire national debt was $1.5 trillion. George W. Bush and Congress have in a single year added an amount equal to the entire national debt one generation ago. And the year's not over!

It took the United States 209 years, from the founding of the republic till 1998, to compile the first $5 trillion in national debt. In the decade since, $6 trillion in debt has been added. This means the United States has borrowed more money in the past decade than in all our previous history combined. Almost all the borrowing has been under the direction of George W. Bush -- at this point Bush makes Kenneth Lay seem like a paragon of fiscal caution. Democrats deserve ample blame, too. Harry Reid and Nancy Pelosi, Democratic leaders of the Senate and House, have never met a bailout they didn't like: Harry and Nancy just can't wait to spend your children's money. Six trillion dollars borrowed in a single decade and $1.5 trillion borrowed in 2008 alone. Charles Ponzi would be embarrassed.

Easterbrook says much more in tightly-controlled, fact-based populist outrage. Read the whole thing.

Cross-posted at They Gave Us A Republic ....

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An Era Of Re-Regulation? Progressives Shouldn't Celebrate Too Soon

So, deregulation in America is supposed to have died last week? Not so fast. Laissez faire, historically, is one of those economic notions that's sort of like Jason in those bad splatter movies -- it keeps coming back.

I don't doubt that, no matter which candidate is elected president in November, deregulation will be a somewhat untouchable position for a while, where financial markets are concerned. Until several years pass, and the $700 billion payoff at taxpayers' expense is complete, we won't hear much about it.

But this zombie is a re-animator's dream, having risen from rigor mortis again and again. It's a toxic idea that has always served the interests of the moneyed class in most societies. Even after being discredited by financial crises such as this one, and by many before, it only takes a generation or two to resurrect it with as much "credibility" as ever.

Onward.

As a one-time college textbook editor, I worked with economists, and found them to be largely a priesthood of ideologues. Their ideas don't have to bear strong resemblance to events of the real world. Among many, if not most of them, the "free market" is a quasi-religion, to be challenged only at the questioning of one's intellect and/or sanity.

Interestingly, most of them, even the "free-market" disciples, agree that the looming $700 billion taxpayer bailout of the U.S. financial system is necessary, though perhaps a necessary evil.

We come back to a condition of humans never liking to admit they are wrong. We also come back to old wisdom that one shouldn't bite the hand that feeds one. Most professional economists have "invested" a big stake in "free-market" theory, and their sources of income -- universities, "think" tanks and such -- generally expect them to maintain a certain ideological purity.

When current events fade into history, don't be surprised if we have a lot of economists, and compliant lawmakers trolling for right-wing votes, who want to start deregulating everything yet again. To broadly paraphrase the poet Santayana, most people do not remember the past, and they are therefore condemned to repeat it.

I'll steal another line, this one paraphrased from Citizen Kane: You're going to need more than one lesson, and you're going to get more than one lesson. In this case, the "you" is the American people.

What happened during the past 30 years was widespread economic amnesia, even among the alleged experts. What was forgotten was people's natural inclination to grow greedy and behave badly when not subject to certain restraints.

It's easy to blame the people who signed on to unsound subprime mortgage loans, who ran up vast credit-card debt, and so forth, if you look at the situation in just one dimension. What about the predatory lenders who offered them all this credit they could never have gotten 30 years ago?

I remember being quite impressed in the spring of 1978, as I approached graduation from college, at being offered my very first gasoline credit card. It was a big deal. "We believe that people about to graduate from college are good credit risks," I was told. Years later I was offered an actual Visa card, and the line of credit was pretty modest.

Now, all you need is a pulse. My 81-year-old mother, in assisted living, is getting solicitations. It would be possible for her to obtain one of these cards and run up a $10,000 tab in a hurry, then default. What would they do? Ruin her credit? Garnish her Social Security check?

The fault ultimately lies with greedy lenders. The great unwashed are always an easy target for blame, but the people in the suits don't have to make such absurdly generous offers to hapless people. This go-round, they approved loans and gave out other credit like it was lunch, with no thought for when the bills came due and they had to actually collect.

A wonderful analogy came from Kathleen Day, a spokeswoman for the Center for Responsible Lending, a consumer-oriented research group. In a Monday piece from McClatchy Newspapers, she commented on the regulatory lapses:

"The job of regulators is that when the party's in full swing, make sure the partygoers drink responsibly. Instead, they let everyone drink as much as they wanted and then handed them the car keys."

Here's the link to the complete article.

It is important to note that Bush, possibly the Herbert Hoover of this generation and much worse, has nevertheless planted seeds for an eventual revival of the old market mentality. One couldn't expect a mediocre-at-best product of privilege to do otherwise. Here's some of what he had to say, as reported by The Associated Press:

The president favored government intervention even though it opened him up to criticism from financial conservatives who are raising their eyebrows at the pricetag of the bailout plan. "Look, I'm sure there are some of my friends out there saying, `I thought this guy was a market guy. What happened to him?'" Bush said.

"Well, my first instinct wasn't to lay out a huge government plan," he said. "My first instinct was to let the market work until I realized, upon being briefed by the experts, of how significant this problem became."

In other words, this is supposed to be an anomaly, not the logical outcome of unregulated capitalism, even though we've seen it in history over and over. Here's the full AP article about Bush's take on this, if you can stomach it.

It would be desirable in many ways to just let the avaricious fatcats go under amid this excess, but that can't be. There are dogmatic libertarians who actually think Americans could be that stupid, both individually and collectively. But we can't afford that. It comes to a kind of economic blackmail -- the risk is too great for too many people who had nothing to do with the bad decisions on either end of the credit process. So, the fatcats will be bailed out.

The hope, against hope, is that "we won't be fooled again." That they won't be able to sell this bill of goods to the next generation in 20 years, and that our own generations of today won't forget. That the libertarians will finally learn that their naivete assumes marketplace self-policing that neither people nor institutions will ever do.

Maybe, just maybe one day, we'll learn. Keep a close watch on your retirement investments in the meantime. Here's one more thought-provoking link by Steve Fraser that I urge the reader to ponder.

Crossposted at Manifesto Joe.

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