http://www.dailykos.com/story/2008/9/20/153952/268/395/603713

If you care to check my posting and comment history you will see that I have been totally in favor of a bail out rescue plan for our financial markets. I've said and will continue to say that it is a necessary evil to keep the U.S. from collapsing into a Second Depression. Sorry, I don't see pie in the blue sky alternative proposals like the government paying off everyone's mortgages as viable, nor do I think we should let the economy collapse in a heap to punish the rich (who never get punished) and then go off to live in a Barter Town world were we all grow corn on the roof. The U.S. definitely needs to do something fast to stop the erosion of the financial markets.

BUT, as NPR's Adam Davidson points out in his new Planet Money Blog, this bill also appears to constitute the greatest transfer of political power from the Congressional to the Executives Branches ... Possibly ever.

From the bill itself:

(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

So essentially the Treasury Secretary can buy any assets he wants on any terms he likes, he can hire anyone he wants to do it, and he can write any kind of regulation he wants. The Treasury Secretary is now essentially in charge of oversight of the Treasury Secretary, and Congress is abdicating once again its own oversight powers, only getting a report from the Treasury Secretary twice a year.

Again, from the language of the Bill:

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Then comes the excessively scary paragraph:

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.

As Adam Davidson says:

Whoa.

So, for the next three months, and then an additional six months after that, the Treasury Secretary can do anything he deems appropriate without anybody anywhere looking it over.

That seems like an awful lot of absolute power.


Apparently, a government of laws is powerless to fix the problems. Henry Paulsen needs the authority to spend whatever he wants, be given an absolute exemption from laws, hire whomever he chooses and is required to check in with congress only twice a year.

Can you say "Trojan Horse"?

Given the choice between complete fascism and hypothesized economic collapse, I pick the latter.

This might be debatable if this administration had given anyone any reason for trusting the purity of their motives.

Indeed. Compare, for example, the bailout plan for 1932, the Reconstruction Finance Corporation, authorized to loan to pretty much any lending agency as it pleased, with not more than $200,000,000 for the relief of banks closed or in the process of liquidation. All loans had to be secured, couldn’t be made on foreign securities or acceptances, no more than 5% of the money could go to any one company, couldn’t exceed three years’ term, couldn’t pay fees or commission to applicants for loans, and so forth. Railroads accepting such loans had to do so under terms acceptable to the regulatory Interstate Commerce Commission.

The law in addition made provision for winding up the Corporation when appropriate and requiring it to report quarterly to the Congress on its activities and employees.

In short, although the situation in January of 1932 was visibly more dire than it is now, Congress was less willing to hand over utter independent authority to the Hoover administration.

Even the giant relief bill of 1935, which gave Roosevelt around $5bn, had more strings attached than this law.

I failed to heed one of the lessons of recent history.

When the administration asks for the authority to do something, such as the authority to torture people, they do so;
a) with the full intent to do it anyway
b) with the full intent to take whatever is authorized a step further.

Paulson says foreign banks can use rescue plan.

WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson said on Sunday that foreign banks will be able to unload bad financial assets under a $700 billion U.S. proposal aimed at restoring order during a devastating financial crisis.

"Yes, and they should. Because ... if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," Paulson said on ABC television's "This Week with George Stephanopolous."

If you disabuse yourself of the quaint notion that your government is here to benefit you, their actions are much less surprising.