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The most amazing part about the proposal that the Treasury Department sent to Congress was its brevity. When one thinks of legislation coming from Congress the vision is one of volumes not pages. The document has the official title: “Legislative Proposal for Treasury Authority to Purchase Mortgage-Related Assets” and, sure enough, that’s exactly what it is.
In reading through the proposal (which can be done in a matter of minutes) the immediate reaction has to be: “Are you kidding?” It is quite understandable why the members of both parties in Congress have similar reactions to the document. The simple net effect of what is being proposed is a blank check being made available to the Secretary of the Treasury to buy up mortgage related assets from any institution he deems to be eligible under any terms he sees fit. In other words: Trust me and I will fix the problem.
Here are the two basic provisions:
“(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, without limitation:….”
Secretary Paulson made the round of the Sunday news programs in an effort to further outline and defend the Proposal and many of the comments made by the Secretary and the interviewers, as well as subsequent guest commentators, proved to be most instructive. He made it clear on “Meet The Press” that the Proposal was designed to, immediately, stabilize markets and he was not offering any proposals that would be designed to correct the problem, punish the guilty, protect the innocent or, in any way, deal with the root causes of the problem itself.
He made it very clear that he wanted a “clean” authority to stabilize the credit markets and the stock market and he did not want to be involved in any form of solution. The final solution, including penalties and attempts at re-regulation of the financial services industry, should be undertaken by the next Congress and whoever becomes the next Secretary of the Treasury.
It would be very interesting to learn how this Proposal was
put together and who its actual authors happen to be. Is this a political maneuver by members of
the current administration to wash their hands of the problem by passing it on
to the next Congress, which by all estimates will be a Democratic one? That they will leave office claiming “
Perhaps I go too far, but then maybe not. On “ABC This Week” after hearing the same comments made by Secretary Paulson, George Will provided a comment that may well define the Conservative Republican philosophy for some time to come: “Trickle down misery.” He also took aim at Senators McCain and Obama saying the former was sacrificing coherence in favor of vehemence (the angry old man charge) while the latter was being calm and reasoned.
On “Face the Nation” Secretary Paulson, under careful
questioning let loose the bombshell that under his definition of
While the Secretary keeps stating that time is of the essence it has become eminently clear that both parties in Congress do not like what has been presented to them. Some of the powers that the Secretary is demanding created “red” flags for just about every one to some degree. For instance, is the Secretary is to be granted the power to “…designate 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….” Needless to say, Wall Street firms are already lobbying to sign up for a piece of the action (nothing like hiring the guys who blew up the system to reconstruct it).
And then we have the creation of imperial authority: “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.” Hopefully, I put this one down to the negotiating clause, the one where you automatically add something that you are willing to negotiate in order to show good faith in giving something up.
The best we can hope for is that Congress doesn’t permit itself to be rushed into signing onto the Secretary’s plan without shaking it down as much as possible. Wall Street is cheering because they know that if the plan does not contain the mechanism for punitive damages and re-regulation, once the market crisis is eased they will have a good shot at blunting the regulators, claiming the problem is gone and they learned their lesson. How about some backbone for a change?
© 2008 Timothy Holland First Published: 09/24/2008
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