Cash for Trash: The New Wall Street Game Show

“Phil, I’ll take “Troubled Assets for $700 bn.”

How much can you get the Fed to pay for your trash? This is the new game in town, and don’t you think the republican’s are going to milk that $700bn for as much as they can get, not what is deserved?

The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.

That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)

You remember the Savings and Loan debacle — one of the architects is none other than John “Keating Five” McCain.

But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.

Now, as Krugman states, Congress is under pressure to pass this plan, too fast and too furious. And lobbyists are going to get their pieces of the action, come hell or high water, on your dime.

Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.

At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees.

Nobody wants to be left out of Treasury’s proposal to buy up bad assets of financial institutions.

And that includes Foreclosure Phil, head of UBS, a foreign bank that had already tried lobbying Congress for a bailout in the past, and is regenerating that effort.

John McCain’s top economics advisor, who is widely believed to be his choice for Treasury Secretary, should he win in November, is former Sen. Phil Gramm. (Indeed, just last night his spokesman refused to say Gramm wouldn’t be McCain’s choice for Treasury Secretary.)

Gramm is both vice chairman of UBS’s US division and a lobbyist for UBS.

If UBS successfully lobbied over the weekend to get in on the bailout, what was Gramm’s role in the lobbying?

And interestingly, the definition of which banks would get help changed over the weekend, to include foreign banks, like Phil Gramm run UBS.

Paulson wanted a clean bill, but he’s getting a dirty (Loaded) bill, via the republicans.

So with all this pressure coming from the republicans, who mismanaged the economy in the first place, Chris Bowers asks why should we bother negotiating with Bush at all?

I am going to ask what might be a stupid question, but why is it important to pass any bailout legislation at all before 12:30 p.m. eastern, January 20th, 2009? As I write this, that is less than 121 days away. Surely, if there is a bailout, it will take several weeks to pass it. In all likelihood, it will take more than a month.
My question is: why is there a big difference between passing the legislation in, say, 40 days, and passing it in 121 days? Will those eighty days somehow make all of the difference? Are the corporate executives involved living from paycheck to paycheck? Is there just no way that they can survive during the intervening 80 days?

Which makes sense to me, particularly when those hit hardest by Wall Street greed are being ignored.

It’s time to end the games.