A phenomenal nine days

By Carol Gee

The deal between the administration and Congress is far from set -- Even though it truly feels like the sky is falling, Congress needs to resist pressure that will be enormous to make an agreement. If a solution is to be found to end the crisis, it must be able to pass Congress. But some members of Congress have their backs up. The assumptions under which the financial sector and the administration are operating have been and continue to be seriously flawed, exhibiting a sense of entitlement that is amazing. "Democrats battling to add restrictions to $700 billion bailout" is at McClatchy today. To quote:

"The Bush administration has called on Congress to rubber-stamp its bailout legislation without serious debate or efforts to improve it. That will not happen," said Senate Majority Leader Harry Reid, D-Nev.

People close to the negotiations said that at least three areas of disagreement remained: limits on executive compensation at troubled firms, the terms of oversight of the Treasury's management of the bailout and whether taxpayers would gain an equity stake in companies that benefit from the bailout so that taxpayers could share in the firms' later profits.

Perhaps at the end of the week something will have happened, but many urge that the administration's plan has serious policy deficits, lacks accountability and likely badly underestimates what the actual bailout cost will be. "As Hill Debates Bailout, Wall St. Shifts Continue -- Paulson, GOP Oppose Democrats' Proposal to Limit Executive Pay." The Washington Post (9/23/08) has the story, from which I quote:

Senate Banking Committee Chair Christopher Dodd says it might be possible may meet approve the bailout by Friday, but it might take longer. . . . Congressional Democrats considering the Bush administration's emergency plan to shore up the U.S. financial system countered with their own demands yesterday, presenting draft legislation giving the government power to cut salaries of chief executives at firms that participate in the bailout and slash severance packages for their top management.

As an example of what some people in Congress are saying, I quote from an article Rep. Bernie Sanders wrote a few days ago (9/19/08) at The Huffington Post: "Billions for Bailouts! Who Pays?."# To quote:

The current financial crisis facing our country has been caused by the extreme right-wing economic policies pursued by the Bush administration. These policies, which include huge tax breaks for the rich, unfettered free trade and the wholesale deregulation of commerce, have resulted in a massive redistribution of wealth from the middle class to the very wealthy.

In my view, we need to go forward in addressing this financial crisis by insisting on four basic principles. . . Specifically, to pay for the bailout, which is estimated to cost up to $1 trillion, the government should:

1) The people who can best afford to pay and the people who have benefited most from Bush's economic policies are the people who should provide the funds for the bailout.

a) Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would raise more than $300 billion in revenue;
b) Ensure that assets purchased from banks are realistically discounted so companies are not rewarded for their risky behavior and taxpayers can recover the amount they paid for them; and
c) Require that taxpayers receive equity stakes in the bailed-out companies so that the assumption of risk is rewarded when companies' stock goes up.

(2) There must be a major economic recovery package which puts Americans to work at decent wages. . . (3) Legislation must be passed which undoes the damage caused by excessive de-regulation. . . (4) We must end the danger posed by companies that are "too big too fail," that is, companies whose failure would cause systemic harm to the U.S. economy.

A little heads up about what the Republicans will argue about the cause of the crisis comes from Josh Marshall* at TPM: Quote: "Democrats created the crisis by forcing banks to give too many loans to black people and other minorities." And Think Progress points out that "McCain Campaign Has Strong Ties To Corporate Lobbyists At Center Of Bailout."

This bears repeating as Congress and the White House negotiate -- "Meltdowns and Morality" by Ed Kilgore from The Democratic Strategist newsletter of 9/15/08. To quote:

As we all watch anxiously to see what the various maneuvers of the Fed and the Treasury and Wall Street mean for the rest of us, Matt Yglesias has made a simple but profound point that tends to get lost at times like these:

Unlike the guy who runs Lehman Brothers, the guys who clean the bathrooms in the Lehman Brothers office have, as best one can tell, been doing an excellent job. And yet if the company going under results in everyone involved losing their jobs, the guy who runs Lehman will wind up being better off than the guys who clean the bathrooms. This is because in the United States of America, hard work is the way to get ahead.

"Confronting Economic Meltdown" a forum -- The Washington Note's Steve Clemons is moderating a meeting this morning on at the New American Foundation. Participants include Congressman Walter Jones, former Senator Fritz Hollings and a panel of experts. (Link to streaming live). At the same time Ben Bernanke and Hank Paulson are testifying about the economy before a congress committee.

Background Stories -- a couple of analytical pieces for those who need to know a bit more.

• "Global financial meltdown"# comes from Global Research (9/19/08).


• A Yahoo! News story headlined - "Radical bailout plan has a jawdropping price tag."#

Hat Tip Key: Regular contributors of links to leads are "betmo"* and Jon#, who said, "The changes that Phil Gramm et.al. put in place are responsible for all this financial mess... Since we all are part owners of AIG, do we get a discount on our insurance?"

(Cross-posted at South by Southwest.)