Who can we trust to give us an honest opinion on the Mother Of All Bailouts?
Is the Emergency Economic Stabilization Act of 2008 the best solution to this crisis?
Today, I offer the opinions of three people who are warning that this legislation, in its current form, is beneficial to Wall Street, but is not in the interests of the American people as a whole, and that in fact, it does not address some of the most serious problems and will not avert a financial meltdown.
Some of the same voices in Congress who warned against the Iraq war are warning against the MOAB. Some of the expert voices who have been warning for years about serious financial crisis are warning against the MOAB and offering other specific solutions.
Economist, Nouriel Roubini
Two years ago, an NYU economics professor named Nouriel Roubini, an expert in international macroeconomics and finance, a man with experience working at the US Treasury for the President's Council of Economic Advisors under Clinton, and was dismissed and ignored by the financial "powers that be" when he described the upcoming crisis that now has come to pass. Roubini and other experts on his website Roubini Global Economics provide analysis and advice that is required reading, IMHO, in considering this situation. It is normally a subscription only site, but they are offering both "additional extended analysis of ongoing and breaking events" and full access at no cost for a limited time.
Roubini is known for his predictions of financial crisis, notably at the IMF in 2006, where he was received skeptically, with one commentator noting his lack of mathematical models. As of 2008 many of his predictions have come to fruition. Formerly an obscure academic, he has received invitations to speak before influential organizations such as United States Congress and the Council on Foreign Relations. As of August 2008, he remains pessimistic on the future of the US economy. He has said that "we have a subprime financial system, not a subprime mortgage market". He does not believe that the United States is entering the next Great Depression, but has said that he believes it will be worst recession since then.
http://en.wikipedia.org/...
His predictions have been accurate for years, and he has offered a plan called HOME (Home Owners’ Mortgage Enterprise): A 10 Step Plan to Resolve the Financial Crisis
While facing a crisis of epic proportions, it seems to me that our representatives in Congress would run, not walk, to this man for advice. However, Roubini says that he has not been consulted by Congress or the Treasury Dept. His opinion of the current Treasury Plan, H.R. 3997 - Emergency Economic Stabilization Act of 2008, is not positive, to put it lightly.
Here is the conclusion paragraph in his article titled
Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks (Thanks to digby for pointing out this excerpt in her post referenced below).
Thus, the Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown. It is pathetic that Congress did not consult any of the many professional economists that have presented - many on the RGE Monitor Finance blog forum - alternative plans that were more fair and efficient and less costly ways to resolve this crisis. This is again a case of privatizing the gains and socializing the losses; a bailout and socialism for the rich, the well-connected and Wall Street. And it is a scandal that even Congressional Democrats have fallen for this Treasury scam that does little to resolve the debt burden of millions of distressed home owners.
--------------------------------------------------
Rep. Lynn Woolsey (D-CA)
American politician, has been a liberal Democratic member of the United States House of Representatives since 1993, ...
She gained attention when she became the first Representative to call for a troop withdrawal from Iraq. She is a prominent member of the Congressional Progressive Caucus.
On Saturday, Congresswoman Lynn Woolsey set forth her position in a letter to her constituents. Clearly the current bill does not meet her requirements because this morning, on the House floor, she spoke against it and announced that she would not vote for it.
---------------------------------------------------
Rep. Dennis Kucinich (D-OH)
Rep. Kucinich makes it very clear that he opposes the MOAB and explains why. Below is a video and transcript of his speech, (with thanks to ["Petulant" at Shakesville http://shakespearessister.blogspot.c... for the transcript and YouTube link).
Transcript
I rise in opposition, regretfully to the rule, and the underlying bill. If we really wanted to protect the taxpayers, we wouldn’t be paying cash for trash; 700 billion dollars in taxpayer funds which turns our beloved U.S. Treasury into a toxic landfill. This plan is a 700 billion dollar bailout of Wall Street speculators, bankers, lenders who operated for years without the oversight of the Securities and Exchange Commission,and the oversight of the Federal Reserve. This legislation does not do anything to punish the speculators; it rewards them by having the taxpayers bail them out. It has no additional controls of speculations. It has no strengthening of oversight; no mention of the implications of the Financial Modernization Act which took down Glass Steagall which provided those post-depression era protections so we wouldn’t be in this situation that we are in right now and I would predict, Mister Chairman, that we will be right back here in a few months with the same kind of problems because we are not solving the underlying matter here; which is a distortion of the economy because of speculation run wild on Wall Street.
Now, we have been given a plan. We haven’t been given alternatives. Alternatives would have required Wall Street to pay for its own bailout. This plan doesn’t suspend dividends, doesn’t force shareholders or creditors to directly contribute to the bailout. This plan rejected a .25% stock transfer tax that would have raised a hundred billion dollars from Wall Street. This legislation is further proof our government has been turned into an engine that accelerates the wealth upwards. Taking money from the pockets of the people of this country and putting it into the hands of the few. That is what our tax policy does. It accelerates the wealth of America upwards. That is what the war does. It accelerates the wealth of America upwards. That is what our energy policy does. It accelerates the wealth upwards into the hands of the oil companies. That is what these financial policies do and it is how our national debt is done which had doubled in the last eight years. 700 billion dollars of the taxpayer dollars are being put on the hook.
When Wall Street makes a profit, it is their profit. When Wall Street loses money, our people lose money. 700 billion dollars. Why aren’t we bailing out those millions of Americans who are losing their homes? Why aren’t we addressing the fact that 50 million Americans don’t have any health care? It is absolutely astonishing, that we are talking about giving 700 billion dollars of taxpayer’s money which comes from the failure of the Fed, through a quadrupling of public and private debt during the time of Mister Greenspan; up to 43 TRILLION dollars. And we have no discussion at all about the underlying monetary policy.
There has been no discussion at all in any of this about the underlying dynamic of a debt-based monetary system. As long as we are working on a debt-based monetary system, with us having no control of our own money supply through the Federal Reserve Act of 1913; with the banks being able to literally make money out of thin air with their fractional reserve policies, how can we ever get to the bottom of a national debt that is building beyond our capacity to deal with it?
You know it is appropriate that this action of the Congress is being timed to the opening of the Asian markets. How appropriate, given the fact that we are losing control of our financial destiny.
Mister Speaker, when I was a child, in Cleveland, there was a myth that if you took a shovel and dug a hole deep enough, you could get to China. We’re there.
http://shakespearessister.blogspot.c...
---------------------------------------------------
What Digby Said
Update 1: I forgot to add this excerpt, in reference to Roubini's conclusions, from Digby's article:
If that's true, then this plan will end up being an economic Iraq. And just as people who said "No Blood For Oil" were told to sit down and shut up or risk having the boogeyman use drone planes to create mushroom clouds in shopping malls, those who are saying today, "no bail out for the rich" are similarly being told that the global economy will suffer a nuclear meltdown if the government doesn't spend this enormous amount of money. And just like then, this all happened in the few short weeks between September and November in a major election year.
We don't know if there are financial WMDs out there. Certainly, enough people think there are that you can't dismiss it. But when the experts who have been predicting the WMD say that the plan to rid the world of them is fatally flawed and won't cure the problem, then they should be listened to. And unfortunately, that won't happen. We're listening to the usual suspects who have always been wrong about everything. And the results are likely to as good as they always are.
I'm not expert in these matters, but the more I read, the less I'm sanguine that this huge giveaway is designed to do anything but constrict the next president from being able to successfully intervene in the recession. The money will be gone, the problem will be growing and there will be fewer tools available to adequately stimulate the economy.
http://digbysblog.blogspot.com/...
---------------------------------------------------
My Conclusion
Roubini recognizes, like most other experts, that intervention is required. But clearly, he doesn't agree with the solution proposed by Treasury and Congress. In fact, I would say that it seems like he thinks we're being swindled... again.
Kucininch, no matter what you think of some of his views and behaviors, has been straight with the people on the subject of the Bush/Cheney administration. He was the only one, until recently, willing to call out this administration for their crimes, and unwilling to enable them. So far, he and Lynn Woolsey are the only Democrats that I have heard speak against this bailout.
Who do you trust to tell the truth about this? Paulson, Bernanke, Pelosi and Reid? Or do you believe people like Nouriel Roubini and Dennis Kucinich?
Not being an expert on this complicated situation, I choose to listen to Roubini, Woolsey and Kucinich. I hope this bill doesn't pass, and they go back to the drawing board, and take the advice of Roubini. I'm going to call my Congressman and Senators, again, and ask them to start over
and put the interests of the American people first when drafting this legislation. I also urge Senator Obama to reconsider his position on this bill. We need a legislation package that intervenes and helps to stabilize the economy in a fair way. This bill is not it.
Capitol Switchboard: (202) 224-3121
Links:
Shakesville: Rep. Kucinich on the Proposed Bailout of Wall Street
Digby: Serious People