The Bailout: Good Idea?

In no way am I an economics expert, and it seems that a quick consensus formed among the economic elite that the crisis is enormous and urgent and that Treasury Secretary Paulson's plan is a good idea -- perhaps with some modifications by the Democrats to make it more of a "Main Street, not just Wall Street" bailout.

But I have some serious questions, mostly prompted by my friend Mickie Nardo in his blog at www.1boringoldman.com and by Glenn Greenwald's analysis at www.salon.com/opinion/greenwald.

Paulson's plan calls for three things: (1) The Treasury Secretary is authorized to buy up to $700 billion dollars worth of mortgage assets at a price determined by him; (2) It raises the national debt ceiling to $11.3 trillion to accommodate this debt; and (3) The Secretary's decisions are not reviewable by any court or administrative agency.

I understand that the situation is dire and that something must be done to prevent the collapse of our whole economic system. But what we essentially have is what Glenn Greenwald calls "high-reward/no-risk capitalism," where they reap millions while their schemes pay off and then shift the loss to the taxpayers when the schemes collapse.

So here are my worrisome questions:

(1) Please tell us how this is going to solve the problem beyond stabilizing the system in crisis. Are we doing anything other than bailing out the investors at the expense of taxpayers? Unless it's in the fine print, there is nothing in this authorization to put back into place regulations that will prevent something similar from happening again, or to hold anyone accountable for preventing it.

(2) What is this huge increase in the national debt, itself, going to do to our economy? Aren't we just once again borrowing more money, which essentially is what got us into this mess: too many people borrowing what they can't afford, too much government spending (including a little war we seem to be forgetting) paid for with borrowed funds; too little accountability?

(3) What about the total free hand, without oversight or review, placed in the hands of one government official? This sounds an awful lot like the blank check Congress gave Bush to go to war.

What I fear is that once again we are being stampeded by a crisis to take action we will later regret. In Viet Nam, the fear was a domino fall of that part of the world to Communism, and a phoney Gulf of Tonkin bombing was used to stoke the fear and push the vote.

We went into Iraq because of fear of Islamic terrorists taking over the world, and manufactured 'evidence' of phoney WMD was used to manipulate public opinion and cow Congress into giving GWBush a blank check.

Now we're being asked to give the Treasury Secretary a blank check to prevent the collapse of the backbone of our economic system. Shouldn't we at least have a debate in Congress about this before we sign that blank check?

And, as my friend Mickie Nardo points out: "I smell a rat! A month away from the election, we have a crisis over something that’s been brewing for years, and we’re supposed to do something before Bush leaves Office? with no Oversight? that costs a trillion dollars? that benefits banks and stock brokers but not "the people?" Looks to me like they've realized that Johnny Mack is probably going down and they've decided to throw him to the wind and bail out their buddies while they still can . . ." (www.1boringoldman.com)

That is a chilling thought.

Ralph