Tuesday, September 23, 2008

A Totally Unscientific Survey

OK, for those of you who don't have the time to read an extremely long post but who would like to know what the editorial boards of the nation's newspapers are saying about the proposed bailout of the robber barons, here's a quick list of links: the NY Times; the Washington Post; the Los Angeles Times; the Boston Globe; the Milwaukee Journal Sentinel; the Minneapolis Star Tribune.

There's nothing magical about this list. It represents the top three newspapers I read every morning, plus the other three I read at least a couple of times a week because I'm interested (for one reason or another) in that area of the country. What I believe all six show, however, is that most of the editorial boards in major metropolitan areas have been embarrassed by their failure to cover just what has been happening in this country the past ten years. Here's what they said.

the NY Times:

Nearly everyone agrees that the there will have to be another very big bailout. The financial system, gorged on its own excesses, cannot stabilize without intervention. The $700 billion would be used to buy up the bad assets that are presumably clogging the system.

To protect the American taxpayer, Congress must ensure that the bailout comes with clear ground rules and vigilant oversight. In an appalling, though familiar fashion, the ground rules proposed by the Bush administration are wholly unacceptable — as are its tactics. ...

The only way to avoid the appearance of a conflict of interest is for Mr. Paulson to welcome full and transparent legislative and judicial review.

A counterproposal now being developed by the Democrats would require firms that sell their troubled assets to the Treasury to give the government stock — an idea that has populist appeal but also needs to be vetted carefully. It also would try to help homeowners, who are left out of the administration’s plan entirely, allowing them to have their mortgages modified under bankruptcy court protection. That step that should have been taken long ago to avert the foreclosures and house price declines that are at the root of the crisis.

the Washington Post:

Treasury Secretary Henry M. Paulson Jr. clearly believes that the way to get the maximum number of financial institutions to unload as much distressed paper as possible, as quickly as possible, is to keep it simple: announce that the U.S. Treasury is open for business and let the fire sale begin. That is essentially what he advocated when he asked Congress for the power to purchase troubled mortgage-backed assets from financial institutions at whatever price he and hired experts saw fit, with only minimal congressional supervision and complete immunity from lawsuits.

The problem, of course, is that this raises the risk that the government will get fleeced by the debt-sellers, raising the ultimate cost to taxpayers. It was also politically unrealistic, in that members of Congress were quite properly concerned that financial institutions accept limits on executive compensation in return for their federal lifeline. There was no provision in Mr. Paulson's proposal for taxpayers to enjoy any of the profits that financial institutions may enjoy once they have been restored to health. A new proposal by Senate Democrats seeks to correct this by requiring would-be asset-dumpers to give the government equity if Uncle Sam winds up having to sell the paper at a loss. Of course, at the margin, the proposal could deter some firms from ridding themselves of the bad loans in the first place. And that would slow the process. Democrats are also insisting on various forms of mortgage relief for the homeowners who are about to find themselves in debt to Uncle Sam. Mortgage relief might help stabilize home prices, but since the government would now own so many mortgages, taxpayers (most of whose mortgages are not in trouble) would have to foot the bill once again.

the Los Angeles Times:

The bailout that Treasury Secretary Henry Paulson has proposed for the U.S. financial system could cost as much as $700 billion, or about $2,300 for every American man, woman and child. Taxpayers rightly expect to receive something tangible in return for such an investment, and there are at least four things policymakers can and should deliver.

Paulson's proposal would let the Treasury Department buy mortgage-related assets from financial firms with few constraints on how the power would be used. For an administration accustomed to overreaching, such a request for unfettered authority is neither surprising nor welcome; the Bush White House is in no position to ask for that kind of trust. Congress should make the Treasury's bailout efforts subject to the same oversight -- by Congress and the courts -- as its nonemergency actions, while also requiring that banks compete for aid and that taxpayers be protected against wasteful spending on overpriced assets.

...lawmakers should make it easier for lenders to help borrowers who can afford to stay in their homes until the housing market rebounds. The Treasury should lead the way by agreeing to write down loan values and reduce mortgage interest rates, and by taking other steps to keep the mortgages it acquires out of default wherever practical. Doing so wouldn't just help homeowners, it would lower the bailout's ultimate cost to taxpayers. ...

Wary of the political backlash, some congressional Democrats want to leaven the aid for Wall Street with money for infrastructure projects, more tax rebates and low-interest loans for automakers. The political appeal of such proposals isn't matched by any broad economic benefits, however. A simpler and more sensible approach is to extend unemployment benefits, which would stimulate consumer spending and boost the economy.

Finally, more needs to be done to protect against another subprime mortgage fiasco. The Federal Reserve Board took an important step in July when it updated its “truth in lending” rules to guard against some types of predatory lending.

the Boston Globe:

Not so fast. While Congress shouldn't drag its feet in formulating a systematic response to the financial crisis, neither should members abdicate their responsibility to protect taxpayers' interests. Maybe, just maybe, companies that allocated their money recklessly shouldn't be rewarded by simply having the government take soured investments off their hands.

A central question is what, if anything, financial institutions will have to give up in return for help from Washington. Mortgage giants Fannie Mae and Freddie Mac and insurer AIG got an infusion of capital from the federal government, but had to submit to government control. Lawmakers need to consider making similar demands of companies that take part in a broader buyout.

the Milwaukee Journal Sentinel:

Congress can demand protections for taxpayers and can demand that any entity holding the bad debt be short-lived and that the government do its best to make the taxpayer whole. It should insist that top management doesn't benefit directly from the bailout.

Congress should insist on assistance for average people, too - think an extension of unemployment benefits, additional food stamp assistance, perhaps even a second stimulus payment.

After that, Congress needs to get back to the hard business of reforming the regulatory system that was supposed to oversee financial institutions. And here's a hint on that one: You can't catch up to a Jaguar when you're driving an Edsel.

the Minneapolis Star Tribune:

U.S. taxpayers are angry about the fraternity party excess on Wall Street that helped create the bailout frenzy we’re in today, and executive compensation that rewards position over performance has become a national symbol of lost priorities. The nation’s four largest investment banks — including Bear Stearns and Lehman Brothers — paid out a total of almost $30 billion in bonuses in 2007.

That’s why Democrats in Congress are justified in pushing for sensible restrictions on compensation paid to executives whose firms will be taking advantage of the proposed $700 billion bailout of the U.S. financial system by dumping their bad debt on the taxpayers.

Hmmm...I see a trend. I just hope that Congress has time to do some critical reading to see the same trend.

Better late than never, eh?

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Blogger Woody (Tokin Librul/Rogue Scholar/ Helluvafella!) said...

At the end of day one of the consolidated cin-man bail-out, it appears Congress is still firmly but insistently arguing for a more measured approach. Having taught Naomi Klein all they know about cashing in on crisis, the money-guys haven't even bothered to camouflage their crass grab of the cash this time. Mebbe Congress can withstand the next 96 hours of continual attack. There seems to be some bi-artisan support for caution fom som Pukes--though the BlueDawgs need to be 'fixed.'
But I doubt it.
The same tactic worked so splendidly and, in an election year, if the Pukes can chivvy the SCUM into their narrative--about as likely as that the roadrunner will escape the coyote--they'll fold like pressed paper.

6:00 PM  
Anonymous joel hanes said...

Ten years? Nonsense.

The press abdicated at the threshold of Iran-Contra, a story it could not screw up enough courage and integrity to cover. With, I hasten to add, the complicity of the American voters -- in Colbert's words, we didn't want to hear it, and they didn't tell us.

12:41 AM  
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