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Paulson’s power grab


 

My favourite line from the proposed US$700 billion lifeline to Wall Street:

“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.”

Hands up if you think suspension of the rule of law is a good idea…anyone?…anyone?

FOR MORE: Paulson’s folly


 

Paulson’s power grab

  1. To presume that a business, with thousands of shareholders, making business decisions so egregiously stupid that capitalism SHOULD have mercifully killed the cancer with a good chemotherapeutic dose of bankruptcy…

    …will now be better managed by a civil servant relying on the wealth from a country of 250 million to clean up past and future blunders…

    …is so insane as to bugger belief.

  2. Where did you get the quote from, Steve. I have been wondering how a couple of guys can unilaterally impose close to $1 trillion of debt onto the American taxpayer without congressional approval.

    That’s something we are used to here in Canada but the U.S. is very different. There are going to be a lot of angry people out there who don’t think it’s a good idea to suspend the rule of law to bail out bankers. I bet members of Congress are getting an earful from their constituents about how bankers deserve to be in jail, not bailed out.

  3. They need congressional approval, jwl. They haven’t got it yet, and likely won’t in the form they requested.

    “Sept. 22 (Bloomberg) — Senate Banking Committee Chairman Chris Dodd offered an alternative today to the Bush administration’s financial rescue plan aimed at giving the U.S. Treasury an equity stake when it helps companies burdened by debt.

    Dodd, a Connecticut Democrat, is circulating a draft of his bill as Congress seeks to deal with a financial crisis that has been called the U.S.’s worst since the Great Depression.

    The Bush administration is proposing a $700 billion plan to buy devalued assets from investment firms to keep the financial system from coming to a halt. Democrats have pledged to act quickly on the measure, even as they seek to create an oversight structure, limit the compensation of executives at the companies benefiting from the rescue and provide mortgage relief for struggling borrowers.

    “We cannot just turn over $700 billion in taxpayer money and not insist that that taxpayer is going to be protected in this,” Dodd told reporters yesterday.

  4. Steve M

    Thanks for the link. That’s amazing, the People’s Republic Of Wall St is almost a reality. I never though I would see the day when U.S. government is the world’s largest mortgage company and insurer.

    John K

    Thanks for link, that’s interesting. However, they seem to be arguing over details but the decision to foist all this debt on American public was made by a few people and now Congress is scrambling like headless chickens to respond.

    If Congress was really in charge they would be writing the rescue plan, and taking their time doing it, while Fed/Treasury officials would be on the sidelines.

  5. jwl, the reason for the rush is that Congress rises at the end of the week until after the election…and who knows what the composition will be like then? More Dems is a good guess, but still just a guess. And Congressmen toe less to the party line than do Canadian parliamentarians (that’s a fancy word that means “party hacks”).

  6. John K

    I don’t believe rushing to make policy like this is a good idea. It seems to me thoughtless legislation got the Americans into this mess in the first place so some sober thought over the course of a few months might make for a nice change.

    Instead they get pols who are pandering to their constituents/base with a one week deadline during an election, which are far from ideal circumstances when writing legislation that’s supposed to save the western financial system.

  7. Quite so.

  8. jwl: I generally agree with that line of thinking. The problem with this case is that it really is a case of act quickly or don’t bother. While that doesn’t make a poor solution any better, it does make it better than “none”.

    To be honest, I’m fairly pessimistic about the whole situation. It’s been building for years because of some sort of mythical trust that deregulation will somehow magically make people act more responsibly. It doesn’t, it never has, and it won’t in future either.

    In many ways it’s the exact same failure as communism — thinking that people will be satisfied once they have enough. With communism, the failure was thinking they’d still be happy to work if they had enough even if they weren’t getting anything extra for it. With libertarianism, it’s thinking people won’t go after short-term gains even if it might hurt them in the long run. Hell, the City of Las Vegas is built on the notion of people looking only at the next pull of the lever rather than the long term trend.

  9. “The problem with this case is that it really is a case of act quickly or don’t bother.”

    Clearly I am not insider who knows what exactly is happening but I question this belief that it has to happen now or it’s too late.

    It seems to me that it’s insiders/bankers saving themselves by inducing panic in the general population who have no clue how wall st works. It’s a quite cozy arrangement between bankers and government employees, who were bankers in a former life.

    At the very least, these wall st clowns don’t deserve their salaries and bonuses, which it looks like they are going to get at the moment, and maybe some should be facing jail time.

  10. Whether the general population has a clue as to how wall street works or not, they’re still the ones who drive it. So if they all go “Oh crap!” and pull out the money, whether it’s based on something rational or not, it has the same effect.

    Personally, everybody who thinks of investing in the market to make money “from the market” needs to watch this.

  11. “suspension of the rule of law” – make it one stop shopping. Fold it into the Patriot Act.

  12. It’s called a “privative clause.” My law professors tell me that – at least in Canada – they generally don’t hold any water.

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