The devil is in the details. And as the details (or “lack of details” might be a more accurate description) of the Bush administration’s latest rescue plan begin to emerge, there are signs for great concern. The opening paragraph of this NY Times story pretty much says it all:
WASHINGTON — The Bush administration, moving to prevent an economic cataclysm, urged Congress on Friday to grant it far-reaching emergency powers to buy hundreds of billions of dollars in distressed mortgages despite many unknowns about how the plan would work.
(emphasis mine)
But haven’t we been here before? This all seems to be modus operandi for this administration.
“Economic calamity” = “Mushroom Cloud”
When Paulson and Bernanke held an emergency meeting Thursday night to brief leaders of Congress, they painted a picture of “economic calamity,” “meltdown,” “cataclysm” if Congress didn’t act immediately to give the administration broad ranging powers and a blank check to address the nation’s economic woes…
This is all too reminiscent of the “mushroom cloud” rhetoric the administration used to stampede the congress into giving it permission to invade Iraq.
Many analysts are already saying the Bush plan will not achieve, that it is not even designed to achieve, any broad-based relief:
So what is the Bush plan crafted to achieve? Again, quoting from the NY Times story linked above:
President Bush and Mr. Paulson made it clear that their primary, and perhaps only, goal was to stabilize the financial markets by removing hundreds of billions of dollars in “illiquid assets” from the balance sheets of banks and financial institutions….
So here’s my take on what’s going on. Remember in the final scenes of the movie Titanic where all the first-class passengers were evacuated onto lifeboats but second-class passengers were left to go down with the ship? Well that’s exactly what is happening here. The US debt ship is going down, being sucked under by $32 trillion in household, business and government debt, an unbearable load. And the people in charge of the ship know that. The only question now is deciding who is to have a place on a lifeboat and who is not.
Details are still sketchy, but apparently what the Bush administration is asking for is carte blanche power to decide which securities to buy, from which banks, and for what price. The price the government will pay will certainly be far in excess of what those securites would bring on the free market. So some select few will be given a place on a lifeboat. But this proposal does nothing to keep the ship afloat, to relieve the debt burden that is sucking it to the bottom of the ocean. So the vast majority of us will be left to go down with the ship.
None of this should come as a surprise to us. We’ve already seen in Iraq when, given the power, the discretion and the blank check, how this administration does things: no-bid contracts, rampant cronyism and outright corruption.
