Also, from
Lew Rockwell's blog :
Writes a journalistic star: The news articles I've read about the $700 billion Senate bailout bill are focusing on the politics. They haven't offered much analysis of what's actually in it, except to say there's a Troubled Assets Relief Program (or TARP), that the FDIC account limits are raised to $250,000 and that the SEC is authorized to waive its mark-to-market accounting rule.
So I read the whole thing myself -- and found odd things like production credits for "marine renewables" and specifications for "residential top-loading clothes washers." My analysis is based on the final Senate version that you can read for yourself here .
I also found lots of problems. Some of them are:
Procedural: The original Bush administration proposal was just two pages long and at least easy to understand. The latest Senate version has ballooned to an amazing 250 pages, including a huge chunk on energy-related regulations, with no hearings on the final draft and only hours for politicians to review something that's quite complex. This is the same rush-the-flawed-legislation-through process used for the Patriot Act seven years ago.
Loopholes: A financial institution can buy $50 billion of financial toxic waste in the form of subprime mortgages, declare bankruptcy, and the Treasury Department is permitted to buy the toxic waste for $60 billion. Or $100 billion. Even though the Treasury should be required to pay _less_ than the original purchase price, that requirement does not exist across the board in this bill. And you can bet that every financial lobbyist in town will be pressuring Congress and the administration to buy up their client's toxic financial assets for insanely high prices. The political process begins to crowd out the free market.
Making housing less affordable: The U.S. Treasury would be authorized to "guarantee" home mortgages, essentially becoming a co-signer, to eliminate foreclosures. If the home-owner stops paying his mortgage, taxpayers will be on the hook. The Treasury Department can also eliminate a "reasonable" amount of a home owner's mortgage debt. This slows the rate of house prices falling, preventing housing from becoming more affordable. And why should careful, frugal homeowners or renters -- who lived within their means -- bail out speculators who didn't? This is in Section 109.
Golden parachutes: There is no statutory dollar limit on how high executive salaries of TARP bailout recipients can be. Section 111 merely says the Treasury Department will come up with "appropriate standards," whatever that turns out to be. And only the top five executives will have their golden parachutes even theoretically limited. All the rest will remain untouched, even if their second-tier salaries and bonuses happen to be in the millions or tens of millions. It's also unclear whether stock options or grants will be covered, which is probably what led Sen. Bernie Sanders to say: "This bill does not effectively deal with the issue of executive compensation and golden parachutes."
Tax deduction: While salaries of failed executives would have no statutory limit, TARP-participating companies would lose a tax deduction if they pay their top executives more than $500,000 a year. But it's not clear how the cap applies to executives at privately-held companies. Chrysler is privately-held; what if its lending arm falters because of bad car loans and it signs up for TARP? In addition, the $500,000 limit only kicks in if the company offloads at least $300 million in assets through TARP.
$700 billion is not the limit: Section 115 of the bill says that the administration can, after notifying Congress and waiting 15 days, purchase and hold $700 billion of assets "at any one time." This is a remarkable loophole. It permits the Treasury Department to buy up, say, $700 billion in 2008, sell those assets off gradually over the next year at a (probable) loss, and repeat the same process in 2009. Losses to taxpayers, in other words, could exceed $700 billion.
Judicial review: Unlike the original Bush administration proposal, judicial review does exist. Sort of. The reality is that Section 119 sharply limits it, tilting the playing field toward the U.S. government if it ends up getting sued as a result of a TARP bailout. Judges cannot issue injunctions related to TARP except for "a violation of the Constitution" (fat chance) and the Feds get automatic halts to any injunctions related to other sections of the law.
The 2013 tax hike: If the TARP ends up costing taxpayers money, the president may ask Congress to consider enacting a law to recoup "from the financial industry an amount equal to the shortfall," presumably through higher taxes. But Congress is under no obligation to do anything; a mechanism to cover the shortfall does not exist in this bill. The other problem is that the firms that benefited the most from TARP may have disappeared five years from now. Why should new companies founded in 2013 pay higher taxes for a bailout that took place in 2008?
FDIC coverage: Even though FDIC coverage would be boosted from $100,000 to $250,000 per account through December 2009, premiums to banks may not take "into account" the higher account coverage. Premiums can't increase for that reason. That encourages more risky behavior on the part of banks.
It's true that is more oversight than in earlier versions, including $50 million to be spent on an inspector general, and a legislative branch "Oversight Panel" producing monthly reports. But even if you support the idea of a bailout in principle, there are plenty of reasons to oppose this particular bill.