Monday, September 22, 2008

Wake Up America ... Are You Paying Attention?

Over the weekend, Treasury Secretary Henry Paulson introduced his "Paulson Plan" (which has already been posted to Wikipedia). If you haven't yet read it, you should. It essentially would give Paulson, an unfettered pot of $700B to spend as he deems appropriate to alleviate this crisis. Section 8 of his plan would prohibit any court, agency or person to challenge how he chooses to allocate the monies (Section 8? How appropriate ... if you've ever been in the military, you know that to receive a section 8 means you're crazy). Section 10 would raise the debt ceiling to $11.315 Trillion Dollars! He plans to give us a report 3 months from now (see Section 4) ... and then semi-annual reports thereafter. Uh ... not good enough buddy ... if that were your personal money, you'd expect at least quarterly reports. I believe we, as taxpayers, deserve equal consideration given that it's our hard earned money you'll be spending (and potentially wasting). Here, read for yourself:

Treasury’s Financial-Bailout Proposal to Congress
The following is the legislative proposal from Treasury Department for authority to buy mortgage-related assets:

Section 1. Short Title.
This Act may be cited as ____________________.

Section 2. Purchases of Mortgage-Related Assets.
(a) Authority to Purchase. The Secretary is authorized to purchase, and to make and
fund commitments to purchase, on such terms and conditions as determined by the
Secretary, mortgage-related assets from any financial institution having its
headquarters in the United States.
(b) Necessary Actions. The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of lawregarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the
Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Section 3. Considerations.
In exercising the authorities granted in this Act, the Secretary shall take into consideration means for —
(a) providing stability or preventing disruption to the financial markets or banking system; and
(b) protecting the taxpayer.

Section 4. Reports to Congress.
Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Section 5. Rights; Management; Sale of Mortgage-Related Assets.
(a) Exercise of Rights. The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.
(b) Management of Mortgage-Related Assets. The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.
(c) Sale of Mortgage-Related Assets. The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.
(d) Application of Sunset to Mortgage-Related Assets. The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Section 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Section 7. Funding.
For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Section 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Section 9. Termination of Authority.
The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Section 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Section 11. Credit Reform.
The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Section 12. Definitions.
For purposes of this section, the following definitions shall apply:
(a) Mortgage-Related Assets. The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.
(b) Secretary. The term “Secretary” means the Secretary of the Treasury.
(c) United States. The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.

So let's see if understand this, America is broke (we're already $9.6+ Trillion dollars in debt, we have a $482B budget deficit projected for 2009, and we plan on spending yet another $80B above and beyond the budget on Iraq/Afghanistan peace-keeping efforts) ... and now we're going to raise the debt ceiling even further to $11.315T, borrow more money from China (or hell just print more bogus paper dollars)? What are they thinking? Isn't that like throwing good money after bad? Hell, they can't even guarantee us it will work.

They're talking about spending hundreds of billions of dollars to purchase "illiquid" mortgage assets that are very difficult to value. Those assets, if you can call them that, would then be held by the Treasury and later resold, hopefully for a profit. That presumes the market and the economy recovers. Given this mess, and the toll it's taken on consumer confidence, I'm not going to count on that to happen all that quickly.

Where's the up-side in all of this for U.S. Taxpayers? Given Section 8 of Paulson's Plan and the sight of Bush and his three cronies weighing in to say they can handle this situation, this plan scares the bejesus out of me. Section 8 needs to be re-written and some form of oversight needs to take its place (especially since there will be a change in administration during the implementation of this plan and an automatic scape goat for why things didn't work). Not only that, before he buys ANY "illiquid mortgage assets" from banks and lending companies (including Fannie Mae and Freddie Mac), they need to sign an agreement limiting executive salaries, eliminating bonuses, etc., for a specified period. They should not be in a position to be rewarded for their poor performance at taxpayers expense. Better yet, if their financial outlook improves subsequent to our bail-out such that it conforms to a particular companies criteria for granting bonuses, those bonuses should be forfeited to the treasury to offset the "illiquid assets" the taxpayers took off their books.

In July 2007, the U.S. population was estimated to be 301,139,947 soles. At a National Debt of 11,315,000,000,000, that means every man, woman and child will own $37,573.90. I don't have that amount of money to spare. Do you? Does your child?

U.S. Taxpayers are not a blank check for anything and everything Congress wants to buy. If they're going to do this, then I expect to a commitment to fiscal restraint. I want to see a Congressional panel assembled that will immediately begin cutting all but 'need-to-have' government programs. I also want Congress to eliminate ALL earmark spending, period. If something can't stand on it's own merit, tough. No more taxpayer hand-out for this pet project, state program or whatever flight of fancy they come up with. We've cinched up our belts and cut out the niceties in our family budgets, it's time for Congress to do the same!

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2 comments:

Desert Beacon said...

Amen.

Cathylee said...

I read this earlier today--excellent! I've already quoted you to many.

Thank you for visiting me.