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Friday, October 3, 2008 |
House: "SUMMARY OF THE 'EMERGENCY ECONOMIC STABILIZATION ACT OF 2008'
I. Stabilizing the Economy
The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion to the Secretary of the Treasury to buy mortgages and other assets that are clogging the balance sheets of financial institutions and making it difficult for working families, small businesses, and other companies to access credit, which is vital to a strong and stable economy. EESA also establishes a program that would allow companies to insure their troubled assets.
II. Homeownership Preservation
EESA requires the Treasury to modify troubled loans - many the result of predatory lending practices - wherever possible to help American families keep their homes. It also directs other federal agencies to modify loans that they own or control. Finally, it improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development to help more families keep their homes.
III. Taxpayer Protection
Taxpayers should not be expected to pay for Wall Street's mistakes. The legislation requires companies that sell some of their bad assets to the government to provide warrants so that taxpayers will benefit from any future growth these companies may experience as a result of participation in this program. The legislation also requires the President to submit legislation that would cover any losses to taxpayers resulting from this program from financial institutions.
IV. No Windfalls for Executives
Executives who made bad decisions should not be allowed to dump their bad assets on the government, and then walk away with millions of dollars in bonuses. In order to participate in this program, companies will lose certain tax benefits and, in some cases, must limit executive pay. In addition, the bill limits 'golden parachutes' and requires that unearned bonuses be returned.
V. Strong Oversight
Rather than giving the Treasury all the funds at once, the legislation gives the Treasury $250 billion immediately, then requires the President to certify that additional funds are needed ($100 billion, then $350 billion subject to Congressional disapproval). The Treasury must report on the use of the funds and the progress in addressing the crisis. EESA also establishes an Oversight Board so that the Treasury cannot act in an arbitrary manner. It also establishes a special inspector general to protect against waste, fraud and abuse."
LetMeTellYou: "People who believe that America's economic problems will be cured by the 'cash-for-trash' bailout bill right now stuck in the Congress are in for a huge disappointment. There is little doubt that the size of this bailout will grow well beyond the initial $700 billion and in the end all this money will help very few outside the Wall Street elite. Simply put, the US government is too poor to save the country's economy by directly infusing money into the financial sector. When we hear of one trillion dollars, we can't even begin to comprehend the vastness of such incredible wealth. Viewed against the backdrop of America's failing financial system, this colossal amount is little more than a roll of duct tape, with which we are trying to keep our Titanic afloat.
Pay very close attention to inflation numbers and to the relative strength of the US dollar. And keep in mind: if something goes down, it will go down very fast. Pay particular attention to any news that Russia or any other major hydrocarbon exporters are switching from trading in dollars to another currency. This may happen if OPEC finally decides to trade in gold dinars or Euros, or if Russia switches oil trade to rubles and moves its oil and gas trades to the St. Petersburg exchange. In case with Russia, this is not a question of 'if' but rather 'when'. Original plans called for the switch in early 2008, but these plans were delayed due to technical reasons. However, in light of America's financial meltdown, Moscow is making this shift a priority. A move like this may cause a sharp drop in the value of the dollar. Russia and Middle Eastern oil exporters are suffering from high inflation rates because their primary export - oil - is tied to the value of the dollar. Switching to trading in a more stable currency is the simplest and most effective way for these countries to control inflation rates of their national currencies."
Bloomberg: "Soros, 78, proposed that banks first try to raise capital from private investors. As needed, the government would inject additional cash into the banks in exchange for preferred stock with warrants or convertible bonds. Existing shareholders would also be given the right to subscribe to the new securities, and could sell their rights to others.
'If administered properly, this recapitalization would be enough to let the banks lend again,'' he said.
Paulson's plan is flawed because the banks' bad debt is hard to value, and to make the plan work the Treasury would have to overpay for the securities, Soros said."
Dissent: "Nowadays it is difficult to imagine any presidential candidate, whether Republican or Democrat, using the terms Roosevelt used - 'common end', 'general advantage', 'public welfare', 'public interest' - to describe the primary responsibility of private industry. Decades of cold-war anticommunism and free-market ideology have deprived those phrases of the positive resonance they once had in our political imagination.
The aquatic metaphors that have replaced them - 'trickle-down economics', 'a rising tide lifts all boats' - invert the relationship between the individual and the group, making private self-interest the source of collective good. You can still join the Commonwealth Club in San Francisco, but the idea of 'commonwealth' has disappeared as a dominant ambition for our collective economic and political life.
We no longer have a language in which to make claims for the rights of the polity against those of the market. Even as gifted an orator as Barack Obama, whose campaign explicitly invokes community, is forced to fall back on Christian ideals like 'thy brother's keeper' when he wants to articulate a sense of common economic and civic responsibility. As for John McCain, he may be a maverick in his willingness to rail against 'Wall Street fat cats' and inveigh against 'greed', but he refuses or is unable to articulate any principled grounds for discrimination between legitimate finance and illegitimate speculation, acceptable self-interest and unacceptable avarice.
Yesterday's failure to pass the 'bailout bill' in Congress shows us the cost of forgetting this. Only the bill's fiercest opponents - conservative Republicans - could articulate ideological principles for their decision, and those principles were derived from the same extreme confidence in free markets and private interests that helped to bring about the present crisis. If their victory does not astound more of the electorate, it is in part because there are few alternatives on offer. Today what we urgently require is what FDR provided in 1932: a compelling vision of the commonwealth."
3:37:19 PM 
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© Copyright 2008.
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