Commentary
Wall Street welfare
By Jerry Mazza
Online Journal Associate Editor


Sep 29, 2008, 00:20

Step right up, folks! It’s the biggest welfare check in history, a $700 billion bailout for Wall Street and friends, arrived at in just four days. But wait a minute. Senator Byron Dorgan (D-N.D.) points out in his Media Advisory that the real cost of bailouts to American taxpayers when you factor in all recent costs is actually $1.7 trillion, not just the $700 billion about to be added.

Here is the list of previous costs . . .

• $29 billion to JP Morgan to swallow Bear Sterns
  
  
• $300 billion in earlier loans to Wall Street Firms
  
  
• $300 billion to the Federal Housing Administration
  
  
• $200 billion for Fannie and Freddie
  
  
• $87 billion to JP Morgan Chase for Lehman Financing
  
  
• $85 billion for AIG (Arrogance, Ignorance and Greed)
  
  
• $50 billion to prop up the Money Market Funds . . .

Having fun yet? Got a question, contact Justin Kitsch in Senator Dorgan’s office at 202-224-2551. Or you might want to reach Alabama Republican Senator Richard Shelby who claims he has a letter signed by nearly 200 (by now) of America’s top economists, Harvard, University of Chicago, MIT, UC Berkeley, et al that says this bailout’s a lousy idea.

In fact, a Bloomberg News Article even contains a link to all the economists’ names. Here’s their statement about their concerns . . .

To the Speaker of the House of Representatives and the President pro tempore of the Senate:
 
As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:
 
1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.
 
2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.
 
3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America’s dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.
 
For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.

Perhaps in the four days the Congress has thought deeply about it, they may have cleared up some of these questions, perhaps not. Sunday’s New York Times’ article Breakthrough Reached in Negotiations on Bailout, the one with the photo of all the conspirators smiling for the cameras, reports “there was a bitter fight over how to pay for any losses that taxpayers may experience after distressed debt has been purchased and resold . . .

“Democrats have pushed for a fee on securities transactions, essentially a tax on financial firms . . .

“ . . . lawmakers and the administration opted to leave the decision to the next president, who must present a proposal to Congress to pay for any losses.” That’s a great one!

“Officials said they have also agreed to include a proposal by House Republicans that gives the Treasury Secretary an additional option of issuing government insurance for troubled financial instruments as a way of reducing the amount of taxpayer money spent up front on the rescue effort.” Who do they think will be paying for the insurance if not taxpayers?

“ . . . Mr. Paulson expressed little interest in that plan, and initial cost projections suggested it would be enormously expensive. But the final details were not immediately available.” Like they say, the devil’s in the details.

“Public opinion polls show the bailout plan to be deeply unpopular. Conservative Republicans [get this] have denounced the plan as an affront to free market capitalism, while some liberal Democrats criticize as it as a giveaway to Wall street (italics mine).” Psst, they’re both right.

“The money will be disbursed in parts [like Kentucky Fried Chicken], with an initial [drumstick] $250 billion to get the rescue effort under way, followed by another [finger-licking wing] $100 billion upon a report by Mr. Bush to Congress.” Arrrgh, I think I’m going to choke on that last bone.

“The president could then request the balance of $350 billion [the whole bucket] at any time. If Congress disapproved, it would have to act within 15 days to deny the Treasury the money” in a Clint Eastwood-type shootout on the Treasury’s steps. Guess who’d win.

Shelby, bless his soul, said he wouldn’t vote for the bailout on any terms. I like a man with guts and conviction. He said, “My position is no.” So there’s one courageous, intelligent being in the building. Well, it’s a start.

But Bush said, and don’t die laughing, “The rescue effort. . . . is not aimed at Wall Street; it is aimed at your street.” I didn’t know West End Avenue, which runs from West 106th Street to West 61st was targeted for any help, although we do have a hell of a lot of potholes.

Bush went to say, “There is now widespread agreement on the major principles. We must free up the flow of credit to consumers and businesses by reducing the risk posed by troubled assets.” If he didn’t do it in seven years and ten months, will he do it in the last two months? Hello Enron America.

Bush must have forgotten, but he said earlier that the bailout is also to help “Main Street.” Elm Street I’m not sure about. Echoing that non-thought was Senator Conrad, Dem as in dumb of North Dakota. He said: “It’s not just going to be Wall Street [that benefits I guess]. The chairman of the Federal Reserve [a quasi independent corporation] has told us if the credit lockup continues, 3 million to 4 million Americans will lose their jobs in the next six months.” You don’t think he’s pushing fear here, do you? Not Helicopter Ben.

“Some Democrats had sought to direct 20 percent of any such profits [supposedly from the Welfare check] to help create affordable housing, but Republicans opposed that and demanded that all profits be returned to the Treasury.” No more pork for the housing bubble, please, especially “affordable housing.”

Are you having fun yet -- now that you’ve heard the brilliant pronouncements of four days and nights of the Punch and Judy Show? It might have been interesting if they had given the Saturday Night Live writing staff a shot at it or Jon Stewart’s gang. Hey, what the hell, life is a cabaret as they say. And it’s only money. Congress also decided that the next president will be given a large solid silver begging cup, so he can go in class to one of the many nations we borrow from for our rent, to buy back the “US” goods made in Third World countries, and our many wars. Silver stands for solid assets, which goes a long way with monetary value. So it’s kind of a symbolic move. Gold, they thought, was a little too showy. Are you having fun yet?

Wait until next week. You’ll be crying your eyes out with laughter(?). Yes, sir, and they will be partying down on Wall Street. The check will be in the mail in for that big rent party to keep the roof over their heads and that big bell sounding like a death knoll for the economy. How about bringing the overpaid ex-stock market chief Richard Grasso back for the ringing sensation of Wall Street Welfare?

Also, how about an IQ test for Congress and another round of SATs to see if they qualify to go back to college or a good vocational high school? Right now they appear to be dumber than dirt, the whole bunch.