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THINKING OUTSIDE PAULSON'S BOX.
Hank Paulson claims that Congress has to act now or the whole financial system will collapse. But, Robert Kuttner points out, it's better to do this overhaul right -- from the bottom up rather than from the top down -- than to do it in great haste:
Paulson's tactic of demanding instant action because impending catastrophe recalls how the same Bush Administration rushed through the USA PATRIOT Act. But there are two key differences. After 9/11, American citizens were terrified and willing to give the Bush administration whatever it wanted. And Congress totally caved. This time, citizens are frightened -- but not gulled. Congress is hearing from constituents that the Paulson plan is an outrage. The easy vote is to oppose it.
So let's stipulate that Democrats get the other major provisions that the public interest requires. These include:
- Limits on executive compensation
- A companion economic stimulus package
- More help for distressed homeowners
- An option for government to get some stock in companies it helps
- An oversight panel to approve Paulson's proposed deals
But what about the core of the Paulson plan itself? Here, Congress needs to think outside the box. Paulson's basic idea is to have government buy up $700 billion worth of dubious mortgaged-backed securities, hold them for a time until normal markets resume functioning -- is both necessary and sufficient. The plan has three larger purposes: recapitalize banks; get bad paper out of the system; and restore confidence generally so that the downward spiral ceases and the frozen credit markets unlock.
Kuttner goes on to explain what a good alternative plan would look like. Read the rest here.
--The Editors
COMMENTS (2)
WALL STREET's RECKONING!
(Yet, it Took 10 Years to Raise MinWage $1.00)
http://www.youtube.com/watch?v=S27yitK32ds
"Rule one: Rush the decision. Time the game to fall in the week before Congress is set to adjourn and just 6 weeks before an historic election so your opponents will be preoccupied, pressured, distracted, and in a hurry.
Rule two: Disarm the public through fear. Warn that the entire global financial system will collapse and the world will fall into another Great Depression. Control the media enough to ensure that the public will not notice this. Bailout will indebt them for generations, taking from them trillions of dollars they earned and deserve to keep.
Rule three: Control the playing field and set the rules. Hide from the public and most of the Congress just who is arranging this deal. Communicate with the public through leaks to media insiders. Limit any open congressional hearings. Communicate with Congress via private teleconferencing calls. Heighten political anxiety by contacting each political party separately. Treat Members of Congress condescendingly, telling them that the matter is so complex that they must rely on those few insiders who really do know what's going on!"
Posted by: Angellight | September 24, 2008 12:37 PM
I am not persuaded that the rush tactics of Paulson and the Bush Administration are calculated to hit Congress at a time when they would feel as if there no other choice. Nor am I persuaded that they are banking on being able to scare the public.
It is more likely that the haste and timing of it all reflects fundamental incompetence, rather than Machiavallian cunning.
The Republicans in charge - and many of the Democrats, for that matter - simply cannot understand this crisis because market freedom is an article of faith for them. Hank Paulson is like a guy who believes the Earth is flat being asked to design a satellite.
Posted by: Michael A. Shea | September 24, 2008 1:19 PM