Yesterday, I took a look at the latest bailout proposal that is currently making its way through the Congress. Is it necessary? I am sorry—to the point of nausea—to say that is probably is if we wish to avert a 1929-style economic meltdown, but there are two things about it that really bother me: one is the power that Paulson wants and the other is the sheer magnitude of the various bailouts.
A Question of Power
In a crisis where oversight failed and the inmates were allowed to run the asylum, Secretary Paulson, in his proposed $700 billion bailout bill, slipped in this little gem:
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.
In plain language, this portion of the bill, Section 8, says that the Secretary of the Treasury may work with no oversight from anyone. In other words, one man will have the final say as to the form and direction that this bailout will take.
Talk about a power grab. I have to wonder if it is the same kind of poison pill that Pelosi peppered her so-called energy bill with recently, the sort that allows you to say you tried to solve the problem but the evil on the other side of the aisle wouldn’t allow it. It is possible, but I doubt it. What is more disturbing is that the President of the United States who, if he really was the kind of Conservative he claimed to be during the elections, should be ticked as hell about this language, is going along with that.
One can only hope that the Democrats will eliminate Paulson’s Section 8 and insert the kind of solid oversight and sane regulation that actually kept our financial sector humming along since the 1930s without sneaking in more funding for left-wing groups or wasteful pet projects. I am sure the final bill will have plenty of both, but of course, consider who we are dealing with. Still, I can hope.
A Question of Cost
$7,712.9 trillion: That, according to the Fed, is the amount of money from all the sources they count that we have as a nation, also known as the M2. The sources for this figure are as follows:
- Currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions
- Traveler's checks of non-bank issuers
- Demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float
- Other checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions
- Savings deposits (including money market deposit accounts)
- Small-denomination time deposits (time deposits in amounts of less than $100,000)
- Less individual retirement account (IRA) and Keogh balances at depository institutions
- Balances in retail money market mutual funds, less IRA and Keogh balances at money market mutual funds
This year, here is approximately how much we will have spent on bailing out ailing sectors of our economy if everything goes through as planned:
- Paulson/Bernanke Bailout - $700 billion
- Housing Bill - $300 billion
- Fannie Mae/Freddie Mac - $200 billion
- AIG - $85 billion
- Stimulus Package - $150 billion
- Bear Stearns - $29 billion
- IndyMac and Others - $99 billion
- Detroit Automakers - $50 billion
That is, of course, assuming the maximum numbers in the legislation and it does not include all the little earmarks that Congress likes to sneak into vital pieces of legislation (such as the $25 million that Congress added to the housing bill for Democratic Party supporter La Raza). That said, the bailouts that we know about as of this writing come to $1,613 trillion dollars.
Housing Crisis—Wall Street Crisis—Energy Crisis
That is 20.9% of all the money we have in the United States. In other words, our government is going to spend one-fifth of the total liquid wealth of the United States to solve a problem of their creation. Now, throw in another $700 billion in overseas oil expenditures, much if which is going to countries that support terrorism and/or openly hate us and now you are talking about $2,313 trillion, 29.9% of our nation’s total wealth.
The Bottom Line: The Price of Ideology Inertia
So, here we are, gearing up to spend nearly a third of our national wealth and for what? If anyone had paid attention to history, this financial sector meltdown would have been predicted. It was predicted, two years ago, but no one in power in Congress wanted to listen, their minds were so thoroughly focused on the idea that everyone must have a home of their own regardless of their ability to afford it, and now it is too late. It should come as no surprise that these same congressional leaders are so beholding to radical environmental groups that they have little issue with sending so much of our wealth overseas and seeing regular folks paying $4.15 per gallon for regular unleaded. Now we have to devote more billions to fixing that.
I call it Ideology Inertia, when you can’t think past your political ideology to make decisions that are best for the American people. It is, of course, endemic through political parties and it is carried by infectious agents called lobbyists, who spread this scourge by throwing money around, much like the U.S. Army and white settlers in the West spread smallpox and other diseases by throwing infected blankets around Native American tribes.
The United States of America will not remain the great nation it is as long as the same people continue to run government and are not held responsible for the foolish or destructive decisions they make, change that is unlikely under our current two-party system. It is because of the ideological focus of political parties that our Founding Fathers had such a profound dislike for them. Consider the following:
I never submitted the whole system of my opinions to the creed of any party of men whatever, in religion, in philosophy, in politics, or in anything else, where I was capable of thinking for myself. Such an addiction is the last degradation of a free and moral agent. If I could not go to heaven but with a party, I would not go there at all.
--Thomas Jefferson to Francis Hopkinson, 1789
However [political parties] may now and then answer popular ends, they are likely in the course of time and things, to become potent engines, by which cunning, ambitious, and unprincipled men will be enabled to subvert the power of the people and to usurp for themselves the reins of government, destroying afterwards the very engines which have lifted them to unjust dominion.
--George Washington, Farewell Address, 1796
Here we are, in the latter half of 2008, and the words of these two brilliant men have come true and we are paying the price for it. Our legislature, our executive, even our judiciary, failed to think for themselves, failed to consider anything beyond their own, narrow, party interests and their visceral need to remain in power. Whoever wins the election will have an awful mess—probably the worst in US history—to clean up. Yes, that person will have to focus on Wall Street and bring the financial sector under control, but he must also consider the conduct of the nation’s legislators and agencies and bring them to heel as well.