Saturday, October 4, 2008

Bail Me Out, Nancy

In a recent post regarding the vote against the bailout, I ended by saying that, with the Republicans voting against the bill, the Democrats ought to just forget about them and put together a truly progressive bill. This is clearly not what happened.
Robert Reich:
This is a lousy bill. It doesn't do the most important thing -- help distressed homeowners avoid foreclosure (that role is given to the Treasury Department, which is the equivalent of putting it into the permanent circular file). It doesn't make Wall Street more transparent (there's almost no word in it about improved transparency and capital requirements, or avoiding conflicts of interest and market manipulation). It doesn't control the most egregious aspects of executive salaries (the bill contains a contorted detour for controlling certain golden parachutes when the government has made direct equity purchases of financial companies rather than taken their bad paper through an auction).

One thing this bill has thrown into relief is the class division in our society. No longer can we talk about America as a classless society, instead the media talks about the dichotomy of unscrupulous Wall Street getting bailed out by idyllic but troubled Main Street. The trouble getting the bill passed has come as congress has tried to please both worlds. Wall Street was able to dictate much of there own bailout (insisting against a bill aiding homeowners, for example). Congress is completely aware of the bills unpopularity, which explains the earlier failure in the house, as well as why voting was left open when the bill was passed to give vulnerable members a chance to vote against it.
Why is the final bill such a crock? The answer is mostly political. The Democrats realized they needed to pass this bill, or else the country would take a beating, but they also realized that bailing fat-cats who had made bad decisions is a political suicide pill, thus blame needed to be shared by both parties. The bill was bipartisan because the Democratic leadership considered this politically necessary. Needing to have the Republicans on board gave them leverage over the bill. My guess, though, is this is not the only reason. These industries, for example the credit industry, have a lot of clout on the hill, and I doubt that there was much appetite for changing the bankruptcy rules among congress-people, for example. The bill is also loaded with pork... the Paulson plan, making him a financial generalissimo, was three pages, the first revision with more oversight provisions was scarcely more than a hundred. This bill is so loaded with pork-rinds that it bulges to roughly 450 pages.

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