UPDATED: Bailout Bill: The good, the bad, the necessary
UPDATE: The Bill just failed in the House. This is not good news, no matter how much you hear Republicans and Progressive Democrats say it is. Hold onto your hats, the ride is going to get rockier from here on out.
There are some disturbing provisions in this bailout bill, alongside some that are for the benefit of those in precarious mortgage situations, facing foreclosure. First, the concerns:
- Expansion of definition of rescued assets - Section 9 seems to expand the scope of the bailout to assets that are not backed by mortgages:
(9) TROUBLED ASSETS.—The term ‘‘troubled
assets’’ means—
A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and
(B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.I ran part B by several people who are familiar with language like this and they agree — this language essentially opens the definition to any security traded on the markets. Think money market funds as an example. Or sector funds. Or currency-backed funds. It is possible that all of these could fall into definition B without public disclosure and behind the doors of Congressional oversight.
- Mortgage Guarantee Insurance Fund – The bill establishes a fund which banks will have to make contributions toward the guarantee of these assets. Having had many years of experience with the Pension Benefit Guaranty Corporation and its precarious financial condition, I am not confident that establishing a fund makes much of a difference, nor that it cures more than it poisons.
- Waiver of requirements for contractors – This provision has me bothered more than any other, because it possibly hands control of the taxpayers’ money back to the same people who caused the problem in the first place.
What I like:
- Specific provisions to mitigate foreclosures by requiring banks to renegotiate loans with qualified homeowners.
- Requirement that transactions be published made public within 2 days.
- Incremental release of funds with oversight as to when and why additional funds are approved for release.
- Timely and rapid reporting and disclosure of the use of funds
- Limits on executive compensation for those leading failed institutions.
What concerns me in general is that this does not really shore up the overall credit markets. I’m concerned that home loans are really the small tip of the iceberg, and some real problems will arise as mortgages recover but people default on their credit cards issued with ridiculously outrageous interest rates and high balances. The same with student loans. All of these are at risk, too. It’s just that mortgages are the canaries in the coal mine.
I have seen some commenting about concern about where the money will come from for this bailout. It’s a fair concern. I think it’s worth noting that the transactions at stake here are an exchange of cash for an asset — a piece of real estate that will have value again.
While I’d like to have the luxury of seeing the speculators and robbers penalized and punished, at this point I will settle for stability here and worldwide with the hope that we can work together to shape a policy and set of laws that protects homeowners, 401k investors, and limits the greed and excesses of those who drove us to this precipice.
Sphere: Related ContentLetters From the Middle Class – Intro
On Thursday’s NewsGang Live, Rob LaGesse made the rather sweeping pronouncement that we were “much better off today than we were 30 years ago.” I disagreed. I also thought he had a rather arrogant idea of what people could and could not do when it came to picking up and moving from an economically disadvantaged area to one that was experiencing growth.
He compared such a migration to the Dust Bowl migration of the 1930’s. At the time, I didn’t have the words or the heart to educate him on what hell most of those migrants went through. Today, their children and grandchildren do indeed have better lives than their parents, but they are in danger of losing that once again to the greed and avarice of our time.
Vermont Senator Bernie Sanders asked his constituents to write letters telling him about how their lives have changed. These are not letters from the poor and destitute. They are letters from the middle class — the people who live next door or across the street from most of us. I plan to publish a few of these over time here on the blog.
If you have a story and are willing to share, I will compile those too, in a category called, appropriately enough, “Letters from the Middle Class.” Yes, we have computers today, and we have TVs, and we have some comforts that weren’t around when we were young. But over the last 8 years, our quality of life has deteriorated nonetheless. People are losing their homes. Even Ed McMahon is facing foreclosure.
This is the product of a government whose primary philosophy has been “Keep it all for the rich, conquer the innocent, and above all, do not share.” While leaving the middle class to sink, this government has bailed out Bear Stearns, allowed corrupt brokerage and mortgage brokers to prosper, and lost track of 7.8 billion dollars in Iraq. Imagine what that same 8 billion dollars could have done to help the people who wrote to Senator Sanders.
When you hear the right wing characterize Barack Obama’s presidency as “dangerous”, understand that danger to them is not the same as danger to us. Danger, as it’s understood by the right-wing money-hackers, means that someone besides their friends and corporate pimps have opportunities. Their goal is to make things better for THEM. That’s not service, folks.
It’s also not leadership you can count on. Consider John McCain’s close relationship to the author of the current mortgage crisis, Phil Gramm, who walks hand in hand with John McCain, shaping his economic policies.
This, ‘my friends’, is one reason McCain is running for a third Bush term. It’s not leadership you can count on, it’s the systematic marginalization of the middle class.
Here’s some change you can believe in. But you won’t get it from McCain or the Republicans.
