October 1, 2008
New Bailout Bill: You Have Got to Be Kidding...It's a Joke Right? Wooden Arrows for Children??
The new bill that the Senate will pass is a 451 page stapled together piece of legislation that has Five Major Parts. Only one of the parts deal with the credit crisis. The additional stuff is from bills that have been sitting around for a while and have been stapled on to the main bill. All this in a hurry.. it is a joke.
Here are the parts: 1) The old House Bill that failed reappears with a few changes. The big change -- the FDIC is now authorized to insure accounts up to $250,000. The Secretary of the Treasury can buy whatever he wants across the board to solve the credit crisis. 2) Then comes a "Energy Production Incentive" Act with tax breaks for specialized activities -- a bill that had been sitting on the shelf. It is not aimed at banks or financial institutions or credit problems. There are tax credits for dishwashers and marine renewables. Great. 3) Then comes "Tax Extenders and Alternative Minimum Tax Relief", a hodgepodge tax bill. The AMT ought to be fixed but the other stuff??? There are tax breaks for motor sport racing, for film and TV producers, for those who received money in the Exxon Valdez Litigation. There is a break in the rum excise tax to Puerto Rico and the Virgin Islands. Those who lay railroad track get a brake. There is a break for "secure rural schools." My favorite section in the bill appears here -- it is on wooden arrows designed for children. This section is full of specialized boondoggles. 4) Next is a section on "Federal Revenue Referrals" to states and counties that contain federal land. What the hell is this doing in the bill?? 5) The final section is really a completion of the 3d section and split by the 4. Are they trying to hide the 4th section. It contains more specialized tax provisions, focusing on disaster relief. There are mine safety provisions as well. This is Congress at its worse. Facing a crisis and yelling about total financial collapse; Congress uses the bill that "will save us" to stick in three hundred or so pages of specialized junk that has nothing whatsoever to do with the credit crisis. And it must be passed in a hurry.
Each of the four additional parts stapled on to the first part are significant and derserves careful attention on their own, not as a free rider attachment to an emergency bailout bill.
This bill is a total embarrassment and if it is the stuff we are going to get to solve anything and do not hold out much hope for it being the fix we need.
October 1, 2008 | Permalink
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You offer the opinion that, "This bill is a total embarrassment and if it is the stuff we are going to get to solve anything and do not hold out much hope for it being the fix we need."
What kind of legislation do you expect Congress to be able to pass when the overwhelming majority of American's cannot even accept the principles of evolution, yet alone how present day commerical banking, by definition, is not a free market business whatsoever, but is entirely a creature of regulation.
Bank's perform "majic," having nothing to do with markets. They borrow short and lend long. This can be done over any period of time only with the confidence that comes from deposit insurance. Look at the money markets and commercial paper markets, both of which are alternatives to bank lending and both of which frozen in the the last two weeks.
Look at the two major banks that "failed," because of w/drawals of jumbos. Only the government is capable of providing that insurance, especially when one understands Coase's theory of the firm. Private insurance has been tried and it fails. No business, today, can afford to spend any significant amount of time worrying about the safety of its daily bank deposits.
Second, more has been added to what should have been simple legislation because people like you in a position to speak responsibly failed to do such. Where have you been the last 2 years when it comes to educating either your students or the public about the unregulated risk being taken on Wall Street. Like every other law professor you have been a silent cheerleader for Larry Ribstein et al. Ribstein finally confessed his total ignorance today, admitting on his blog, "As you can see, I’m confused.
Contrary to the Fox News propaganda line, the Democrats have absolutely no responsibility for the non-agency Mortgage Backed Securities that Treasury is looking to buy with the $700 billion from the bailout. The "rescue" of Ginnie May, Fannie May has already opened the pipeline for the Treasury to spend taxpayer funds on agency backed MBSs.
This program is to buy the non-agency MBS, which were essentially blind pools issued by unregulated sponsors to unregulated buyers in a totally unregulated market. McCain understood this when he said Cox should be fired. He got off that line when Murdoch told him that Sean Hannity and Rush were going to go 24/7 with the totally false charge that the Democrats were responsible. When you combine ignorance and medacity, this bill is what you reap.
The Democrats are now about to administer the coup de grâce to the House Republicans. They will now pass this bill w/o their votes, if necessary. They will get all the political benefits and wrap the idiots in irresponsibility. The Senate Republicans want to get rid of the House Republicans---this bill is the ultimate wedge issue between big business and the social conservatives and the Senators are smart enough to know where their interests lie
Posted by: Moe Levine | Oct 1, 2008 8:19:24 PM
Logrolling at its finest. Thanks for bringing confidence and stablity to our markets Congress. I think a good term here is how Peter Lynch describes hastened and ill advised diversification: "diworseification". Maybe the goal it to just make the bill complicated enought that no one can understand it and then it'll pass, but of course be largely ineffective (see diworseification). You can tell how satisfied I am with our congressional leaders right now.
Posted by: Mike Rosemeyer | Oct 2, 2008 7:54:49 AM